Service tax on renting out a residential property

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Narayan Subramaniam

Business

24 Points Posted on 11 March 2013

Hello,

I would like to know the various tax implications involved in renting out a residential property to an individual or a company?

a) Service tax - As I understand, since the property is a residential property, service tax is not applicable as it will be used for residential purpose only.

There was an article a year back that expected: High house rents may draw service tax https://www.business-standard.com/article/economy-policy/high-house-rents-may-draw-service-tax-112030400057_1.html

What is the current stand as of today because the residential property in question would draw high rent?

2. Income Tax - I understand Income tax would be applicable as per tax bracket.

Thanks and please let me know.

Replies (7)

Vikas

1245 Points Posted on 11 March 2013

Renting of a residential house property for the purpose of residential dwelling would not attract Service Tax by way of negative list entry under Sec.66D(m) of the Act.

Manoj Agarwal

Service Tax Consultant Rourkela Service

2755 Points Posted on 11 March 2013

Agree with Vikas Ji...

For Service Tax purpose, for your reference, quoting the said section 66D of the Finance Act, 1994,

(m) services by way of renting of residential dwelling for use as residence;

For Income Tax, higher of Gross Annual Value and Fair Value is taxable under the Head Income from House Property. Certain deductions are allowed like Interest on Borrowed Capital upto Rs. 1.5 Lakh.

Regards,

tax2001-it @ yahoo.com

Ashwini Degavinti

Articled Assistant

22 Points Posted on 15 November 2014

Can someone tell me if Service tax is applicable in the following case-

I have let out the ground floor and the First floor of my propety for some commercial use.(Rental Income is less than the threshold limit).

Now I want to let out the 3rd floor for RESIDENTIAL purpose.(Sec 66D(m) of the Negative list states that "Services by way of Renting of residential dwelling for use as Residence" is not taxable.

But my doubt is if I let out the property partly for commercial use and partly for Residential use ,then it shall be DEEMED to be immovable property for the use in the course of furtherance of Business or Commerce.

And now that the my Total Rental Income from all the 3 Floors exceeds the threshold limit (10lakhs). Will I be liable to register and Pay Service Tax.

Or all the 3 floors has to be considered as a separate property..??

Please Help,

Thanks & Regards

Ashwini Degavinti

Manoj Agarwal

Service Tax Consultant Rourkela Service

2755 Points Posted on 17 November 2014

If you rent the 3rd floor of your building which is a residential dwelling and the same is to be used for residence only, then no service tax is applicable and the rent received from the same has to be ignored for calculation the threshold exemption limit of Rs. 10 Lacs.

Vinay Garg

Service Tax Expert

358 Points Posted on 17 November 2014

Originally posted by : Manoj Agarwal
	For Service Tax purpose, for your reference, quoting the said section 66D of the Finance Act, 1994, (m) services by way of renting of residential dwelling for use as residence; For Income Tax, higher of Gross Annual Value and Fair Value is taxable under the Head Income from House Property. Certain deductions are allowed like Interest on Borrowed Capital upto Rs. 1.5 Lakh.

I agree.

kamlesh

prop

37 Points Posted on 08 July 2015

Hi all Wanted to know that if I am taking residential property on rent and yearly rent is more then 10 lac.. So do I need to pay service tax? If the same property if I sub lease to college students for residential purpose for one year and I am charging rent less then 1000 per day then do I need to charge service tax from them? Please let me know ... Thanks.. Kbhathena @ gmail.com