One of our individual client is having rent income from house property @ 70,000 p.m
During the F.Y 2011-12 she has got 2 months advance rent of 1,40,000.
Keeping in mind Point of Taxation rules & other provisions for the F.Y 2011-12, is this advance receipt liable for service tax during F.Y 2011-12 or any of the subsequent years?
If it is to be finally adjusted in the service of renting then yes. If it is a refundable deposit then no. However if at the time of refund if any deposit is forfeited for default in rent or any taxable service then it is taxable. If the deposit is refunded after deducting any costs towards damage done to property that could be an accidental dameg then no service tax on the deduction from the deposit. Eg. If the tenant damaged the door and you have to replace it for 50K that you deduct from 140K then not taxable. If you adjust 70K of the last months un paid rent then that is taxable. This becomes taxable at time of deposit if your agreement will state that it is adjustable. Then that portion which is adjustable is taxed at time of advance receipt itself. Since your rent is received in Advance in 2011-12 it is also taxable on a receipt basis.
Also remember you can minus the municipal tax from rent amount only after it is paid.
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
CA Final
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