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Is tds applicable on rent paid as compensation for flat

Fahad Haroon Memon (Administration Manager ) (84 Points)

05 October 2012

Dear all,

Please help me with the following doubt.

A builder has undertaken a project for redevelopment. He made the existing tennants leave their homes and they are now living in rented flats. The builder is paying the rent to these tenants for the flats. The amount of rent is exeeding the limit of Rs 1,80,000/-. Is he liable to deduct TDS on the rent paid??

Also, what if the tenant does not provide the builder with his PAN?

Please help me out.

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15 Replies

ANJALI NEGI (Chartered Accountant) (1263 Points)
Replied 05 October 2012

TDS will be deducted @ 10% as per section 194I of Income Tax Act in the above mentioned case. Moreover if the assesse doesnt furnish the PAN which is must then TDS is to be deducted at the flat rate of 20%.

CA Pooja Agarwal (Chartered Accountant) (3228 Points)
Replied 05 October 2012

first of all..rent is payable to landlord..builder is just kind of reimbursing the tenants for the rent..the land lord should furnish the PAN,why the tenants are required to furnish PAN?

1 Like

ramcharan (articled assistent) (367 Points)
Replied 05 October 2012

TDS is deductable on the rent paid even though the benefit enjoyed by others

CA Pooja Agarwal (Chartered Accountant) (3228 Points)
Replied 05 October 2012

TDS had to be deducted,,there is no doubt about it..but the matter of fact is who has to furnish the PAN?

ramcharan (articled assistent) (367 Points)
Replied 05 October 2012

absolutely the payer has to furnish his/his firm's pan

CA Saurabh Kataria (Partner) (68 Points)
Replied 05 October 2012

TDS will be deducted @ 10% as per section 194I and landlord has to furnish his PAN Number, otheerwise TDS will be deducted @ 20%.

Tenants are not required to furnish their PAN at all.

CA. JAIN (Chartered Accountant) (466 Points)
Replied 06 October 2012

I have different views......here payment is done by builder on behalf of tenants,,,,so we can say in actual payer is tenants..and payee is land lord.....builderer is just giving compensation...........

eg. if ram purchase goods from shyam. at the time of payment ram say to his consumer say eg.x to pay amount to shyam........in above trans, buyer is ram and seller is shyam...only due to x is paying on behalf of ram it cant be say that buyer is x...........

Now question arise...who will deduct tds......

i think..it will be deducted by tenants

note... if the tenants are individual or huf then sec. 194 I not applicable......

1 Like

Gunjan Tulsyan (Article) (222 Points)
Replied 06 October 2012

No one will be the best person than me to answer this question as i m in the same situation...according to it is the tenants who are required to deduct the TDS u/s 194I in case the amount is exceeding Rs.1,80,000 then only...and also it is the expense of the Tenant and not the builder...its just that the builder is reimbursing the tenants...actually he is not kind of reimbursing the transaction has the look of reimbursing...so the builder is not required to DEDUCT THE TDS

1 Like

CA. JAIN (Chartered Accountant) (466 Points)
Replied 07 October 2012

Hello Gunjan,

Its good to see to u so mch confident.......but sec 194 i not applicable to tenants if they are individual or huf eventhough payment is more than 180k ,,,,,,,in above case tds deduction liab. is on tenents only if they are other than ind. and huf and rent is more than 180k

kavita kadam (ARTICLE) (39 Points)
Replied 10 December 2012

ONE OF OUR BUILDER CLIENT GOT THE PROJECT OF REDEVELOPMENT OF OLD BUILDING .

SO HE REIMBURSE THE RENT TO THE OWENER OF DEMOLISH BUILDING WHICH THEY ARE PAYING TO THE LANDLORD.

IS TDS IS APPLICABLE ON RENT PAID BY THE BUILDER TO THE OWNER OF THE DEMOLISH BUILDING.

BUILDER PAID THE TDS AS REIMBUSREMENT OF RENT.

IS THE TDS HAVE TO DEDUCTED BY THE BUILDER WHEN HE IS PAYING THE RENT TO OWNER OR NOT?

IF HE DEDUCT THE TDS THEN WHEN FILING THE TDS RETURN WHOS PAN HE HAS TO FURNISH THE OWNER OF THE DEMOLISHED BUILDING OR THE ACTUAL PERSON WHO IS GETTING THE RENT.

TELL ME THE ONLY TDS IS APPLICABLE OR NOT

CA Arun Valera (BCom, ACA, LLB) (320 Points)
Replied 20 July 2013

Dear Experts, I understand from the discussion that TDS is not applicable on compensation paid by builders to tenants, because it does not fit in the definition of "Rent" u/s 194-I. Can any one please cite a case law supporting the same view? Thanks in advance.

Nirav gala (ca) (21 Points)
Replied 24 March 2014

TDS is not applicable on the rent COMPENSATION provided by the builder undertaking the redevelopment of the old building.

There is no Tenantship in the transaction.

Actual Landlord is the one whom tenant is making payment.

Hence NO TDS to be deductecd on such reimbursement transactions.

Shishir Karmokar (accountant) (37 Points)
Replied 20 February 2015

Please Clarify whether TDS is to be deducted by a Pvt Ltd Co. undertaking redevlopment projects in Mumbai, where the compensation (Rent) to owners who are given money for alternate accomdation. the amount is more than Rs. 15000/- PM.

If the flat owners is paid of Rs. 25000 PM but he pays rent of Rs. 20000/- PM whether the differnce is taxable and under what head. similarly if the flat owner is paying rs. 30000/- PM whetther the differnce of Rs. 5000/- PM can be claimed as expense and under what head.