Dear Hari,

Thanks for your reply. I want you to please clarify the application of TDS in following two cases, Payment made in both the cases is in foreign currency made to resident by NR

1. Property(residence) for which rent is being given is situated in India.

2. Property (residence) for which rent was being paid is situated outside India.

As per simple interpretation of 194I, both the above cases will be covered under the 194 I. That means a Non resident, if paying rent for a property situated outside India belonging to a resident in India should deduct TDS and get itself registered in India and file the return of TDS and issue TDS certifictae.

As non resident making payment to resident is covered and there is nothing mentioned in regard to situation of property in section 194I.

Sec 194 I

Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent

Thanks in Advance.

Regards

Amit Mehta
 

Dear Amit

Pls go through section 194I along with CBDT Circular : No. 718, dated 22-8-1995.

1) Section 194I read as "Any person, not being an individual or a Hindu undivided family, who is responsible for paying to any person any income by way of rent, shall,....

Interpretation: -

Any person includes any person other that individual or HUF (except who are liable u/s 44AB).............i.e, ANY PAYER Is covered u/s 194I subject to above

 to any person  includes ANY PAYEE ASSESS whether resident (ROR or NOR) or non resident

2) Further read circular with explanation to this section defining "RENT" as "Rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement  for the use of any land or any building (including factory building), together with furniture, fittings and the land appurtenant thereto, whether or not such building is owned by the payee;"

 Rent is defind in general refrence & not specifically in respect to any property situated in india or abroad.Thus, it is irrelevant to see whether rent is paid in respect of property situated in india or outside.

3) further as you used the payment by NR to "RESIDENT".....then pls note that all incomes of a resident  (I am assuming ROR assessee) assessee whether accrued or arise in India or not are taxable in india & hence, he is subject to TDS on his income.

4)  for the use of any land or any building  indicates ANY LAND  or BUILDING (irrespective of place of ts location).

5) Conclusion: -

Thus, the answer to both of your questions is in positive.

I am really impressed by the arguements and cross arguements of both the learned members .

As regards Amit's query "Property (residence) for which rent was being paid is situated outside India." there definitely the income will neither accrue or deemed to accrue or arise in india and hence chargeability under secion 5 shall fail and there shall be no question of deduction of TDS on said payment.

The DTAA's also shall come into picture in the instant case. Normally all DTAA's provide for taxation of rental income in country where such property was situated, hence if the property is situauted outside India then there shall no question of its taxation in India either under Income Tax Act or DTAA.

Anuj

+91-9810106211

femaquery @ gmail.com

Respected Anuj Sir

With high respect to you & to your opinion, I would like to substantiate my point, which off course may be subject to further professional discussion: -

Inputs: -

1. Basic Objective of DTAAs: -

The stated goals for entering into a treaty often include reduction of double taxation, eliminating tax evasion, and encouraging cross-border trade efficiency.

2. Indian Income: -

Any Income which is

• Accrued or deemed to accrue or arise in India AND Recd or deemed to be recd in India          OR
• Accrued or deemed to accrue or arise in India BUT Recd or deemed to be recd OUTSIDE India             OR
• Recd or deemed to be Recd in India BUT Accrued or deemed to be Accrued OUTSIDE India

3. Foreign Income: -

Any Income which is

• NEITHER accrued nor deemed to be accrued in India
• NOR recd or deemed to be recd in India.

4. Words used by me in my previous post in pt no (3): -………. all incomes of a resident  (I am assuming ROR assessee) assessee whether……..

Output: -

5. Conclusion: -

Based on all the above points , following conclusions may be drawn: -

• Rent paid by the Foreign co. to Resident (where I presumed ROR only) for his property outside India is his FOREIGN Income

• EVEN a FOREIGN Income is FULLY TAXABLE in the hands of an ROR RESIDENT.

• There is no question of Non chargeability of this income under section 5 as per your statement as this income is duly chargeable in india itself (because assessee is ROR) in the hands of ROR assessee even though foreign income

• “Further, you stated DTAA will come into picture”…..I must say that DTAAs as stated above in pt No1 come into picture only when there is chance of double taxation among other reasons. But, here in this case as it is CERTAIN that the income is  surely & fully taxable in india & there is no question of double taxation, it should not have any impact on the taxability of this income (being taxable in India only).

• Even though foreign state where the property is situated may charge tax on it, DTAA benefit can be claimed by the assessee. But, in any case TDS provisions cann’t be forbidden as claiming of benefit option is still there.

• Thus, TDS must be deducted as per the liability imposed by section 194I ….interpretation already explained in earlier post.

Dear Hari,

I must congratulate you for the excellent exposition on the query.

I agree that the rent received for a property situated outside India shall be taxable on receipt basis (in case of ROR ) as per Income Tax Act,1961, but still situation can change with the wordings of RELAVENT DTAA.

Also,I have different views for the non applicability of DTAA for the pupose of deduction of TDS .

DTAA's also decide the taxing rights of two countries on particular source of income. If the DTAA provides that particular income shall be taxable in one country only then the other country looses right to tax that income.DTAA's come in picture the moment the payer and payee are residents as per DTAA of TWO DIFFERENT COUNTRIES. In the present case th payer is resident of Singapore and the payee is resident of India and hence they both are entitled to use the provisions of India -Singapore DTAA .

You may also agree with me ,for ex. in case of Technical fees being paid by Indian Firm to resident of USA ,the same is taxable u/s 9(1)(vii) and TDS is deuctable u/s 195 ,if we strictly go by Income Tax Act, however if the USA Party qualifies for make available clause under India-US DTAA ,then there is no need to deduct TDS u/s 195 as that income is not chargeable to tax in India.

So in my view DTAA's play DECISIVE role in deduction of TDS also.

Anuj