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Query on 194I TDS on rent

Kalyan Chakravarty (Student) (76 Points)

06 January 2011

Hi friends... Pls clarify me in this regard about the issue on 194I tds on rent while performing internal audit..

(a) There is a client which is paying rent for a buliding to 10 different persons on the instructions of the landlord who are the relatives of such landlord. The payment to each individual will not exceed the limits but the aggregate payment will exceed which seems to ba tax planning........ Is this valid in the context of IT Act ... if any circular/notice exist ...pls reply me as earliest as posible.

Kalyan

CA final- Article Assitant

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22 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 06 January 2011

if the rent and portions are divided for each individual in property then each would qualify for separate land lord, otherwise the TDS applicable on gross and would be deducted from main landlord or the 1st receipent in the list.

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CA NEHA AGARWAL (Practise) (227 Points)
Replied 06 January 2011

Mr.KALYAN

Acc to me aggregate payments made to the relatives on behalf of landlord is taxable in the hand of landlord only and all tax provisions would be applicable to him only.

Because mere payment doesn't mean income of a particular person.

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Kalyan Chakravarty (Student) (76 Points)
Replied 06 January 2011

Thks for reply.....

Mr Sharma-- your point seems to be logical.... but how its possible to know if there are any co owners to the property and as a landlord ...he will not wish to share his agrrement.... if tds is not deducted the payer has to suffer while tax audit not he payee (landlord)..

Ms Neha,,,, are u referring to any clubbing provisions...

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 06 January 2011

deduct the TDS from landlord ( as he is not receiving the rent u cant deduct)or the 1st name in the list provided.... if they have to save they have to allocate the specific portions for each landlord, specific individual rent receipts and then they can get rid of TDS,

CA NEHA AGARWAL (Practise) (227 Points)
Replied 06 January 2011

No I am saying in the context of TDS provisions only because this is directly related to the income only. See i'll explain u with an example like if the landlord instruct your client to pay the rent amount to his debtors it doesn't mean that u have to consider their debtors for TDS.It is based on the agreement what your client had with the landlord.If the agreement is between the landlord and the client only then Tax will be deducted on the aggregate payments only.

CA Vitrag S Modi (Chartered Accountant) (186 Points)
Replied 06 January 2011

According to me.

If your client have rent agreement with only one landlord and no other persons are involved in the agreement then you should consider all payments together and should deduct TDS. On the other hand, if your client has entered into a rent agreement which itself shows that particular amount shall be paid to different persons, then you can consider all of them different. I mean to say that If agreement implies all of them as different landlords.

I am not sure whether you should consider their co-ownership, if any. The reason is that in this case he is owner but in many cases he may not be the owner and he may have sublet the property.

Let me know if I am wrong anywhere.

Sharad Suman Das (art) (141 Points)
Replied 06 January 2011

Dear Frends,

In the above mentione d case the deduction of TDS depends upon the rent agreement and the fact of the case.

if the recievers of the rent are the joint owner of the property on proportionate basis then and the rent agreement specifies that those individual will recieve the rent for their part of ownership in the property, then the amount of TDS will not be deducted from the amount of rent paid ro each of them.

But in absence of any such agreement and where the recievers of rent are not owner of the property then it shall be deemd that it is paid to one person and TDS shall be deducted from the amount of rent paid.

Two points must be kept in mind that

1. Reciever of rent must heve the ownership in proportionate part of property

2. the same should be specified in the agreement

CA MAULIK (C.A) (937 Points)
Replied 06 January 2011

i think TDS should be done if limit of 120000 PA is breached and it seems a diversion of income from the landlord's side...........your client is paid rent ,provisions of 194 I would come in to play...irrespective of agreement.........

CA CS Preeti Mehta (nil) (635 Points)
Replied 06 January 2011

Originally posted by : Vitrag S Modi

According to me.

If your client have rent agreement with only one landlord and no other persons are involved in the agreement then you should consider all payments together and should deduct TDS. On the other hand, if your client has entered into a rent agreement which itself shows that particular amount shall be paid to different persons, then you can consider all of them different. I mean to say that If agreement implies all of them as different landlords.

I am not sure whether you should consider their co-ownership, if any. The reason is that in this case he is owner but in many cases he may not be the owner and he may have sublet the property.

Let me know if I am wrong anywhere.

Agreed with VIRag

Neerav Karia (Article Assistant ) (68 Points)
Replied 07 January 2011

Originally posted by : Vitrag S Modi
	According to me. If your client have rent agreement with only one landlord and no other persons are involved in the agreement then you should consider all payments together and should deduct TDS. On the other hand, if your client has entered into a rent agreement which itself shows that particular amount shall be paid to different persons, then you can consider all of them different. I mean to say that If agreement implies all of them as different landlords. I am not sure whether you should consider their co-ownership, if any. The reason is that in this case he is owner but in many cases he may not be the owner and he may have sublet the property. Let me know if I am wrong anywhere.

Rajesh (student) (76 Points)
Replied 07 January 2011

According to Clubbing provisions mere transfer of property income with out transfer of ownership rights the income is taxable in the hands of transferee by this tds is also calculated on agreggate payment to the landlord

sriramkrishnamurthybalaji (Accoutant) (21 Points)
Replied 07 January 2011

In a Trade Fare we have taken Exhibition Hall Treat, Whether TDS under Rent or Not?

Shivish Verma (C A) (376 Points)
Replied 07 January 2011

If all the relatives are the co-owners then limit of 180000/- shall be considered individully. (Amalendu Sahoo V/s ITO 2003 264 (ITR) 16 (Cal).

and if its merely a tax planning, (diversion of rent to different person) then no matter who is the recepient.

None but the Owner of the property is subject to TDS and limit of 194 I shall be checked accordingly.

Shivish Verma (C A) (376 Points)
Replied 07 January 2011

If the relatives are not the co-owner and just the recepient of money, then tds shall be deducted in the hand of landlord and, Limit of Rs. 180000/- shall be checked considering the rent agreement. i mean the total amount of rent.