Service tax from rental income!

Queries 987 views 8 replies

Shilpa Vasudeva

Proprietor

39 Points Joined April 2012

Hi everyone,

I have a query on service tax, facts of which are listed below :

1. Since 2007, the assessee has Income from House Property exceeding threshold limit for charging service tax.

2. However, no service tax has been collected from the tenants and deposited by him for any of the 5 years.

3. Now, he wants to pay taxes for all 5 years under Service Tax Voluntary Compliance Encouragement Scheme, 2013.

4. Query is : If he pays service tax from the rent already recieved ie if the rental reciepts are deemed to be inclusive of service tax, then on paying such taxes, would he get any rebate in income tax?? Eg : Rent received in 2012 - Rs. 1,123,600. Service tax on this would be Rs. 123,600. Now, for IFHP calculations, would gross annual value be taken as Rs. 10,00,000 or Rs. 11,23,600.

5. If such adjustment is possible, for how many years can he take such rebate?

Thanks in advance

Replies (8)

Vikas

1135 Points Joined January 2010

In my view, the Service tax payment shall be taken as your expense without any limitation of period, as

1. Its a duty which is collected and paid. Since, you are reverse - calculating Service Tax, the same has already been shown as your income for so many years.

2. Hence, the same shall be claimed as an expenditure under Sec.43B of the Income Tax Act, 1961.

Manoj Agarwal

Service Tax Consultant Rourkela Service

3456 Points Joined March 2012

Dear Shilpa, I don't agree with Vikas Ji as Sec 43B is applicable for Income from business or profession, so it has no applicability while computing income from House Property. In my view, if the Actual Rent was the Gross Annual Value (GAV) of the property, then service tax should be reduced as it is not 'Rent' received . The tax is being received on behalf of the government and is not the income of the recipient. If Fair Rent was considered as Rent, then service tax would not make any difference in I.T liability. Kindly mail complete details for better analysis. Regards, tax2001-it @ yahoo.com