Taxability of security charges received from tenant

Great question, Shreyash! Here's how the tax treatment generally works in this case:

Situation Recap:

• Your client earns rental income from a shed — which is taxed under Income from House Property.

• Additionally, your client provides security services to the tenant by hiring a third-party security agency.

• The client raises a separate GST invoice for security charges to the tenant, which exactly covers the cost paid to the security agency (no profit).

Tax Treatment:

1. Rental Income from Shed:

   • This income will continue to be taxed under Income from House Property.

   • The rent received (or receivable) is taxable under this head.

2. Security Charges Received:

   • Since the client is providing an additional service (security) separate from renting the shed, and issuing separate GST invoices for this service, this amount will not be treated as income from house property.

   • The security charges are revenue receipts related to providing services, even if no profit is earned (i.e., reimbursement basis).

   • Such receipts are generally taxed under the head "Income from Other Sources" (if it’s incidental or occasional) or "Profits and Gains of Business or Profession" (if the client is running a regular business of providing such services).

   • Given the client is hiring security services externally and merely passing on the expense, it looks like a reimbursement of business expenses, hence likely falling under Income from Other Sources (no profit).

GST Aspect:

• Since GST invoice is issued separately for the security service, it confirms this is a distinct taxable service.

Summary:

Important Note:
The client should maintain proper records to show that the security charges are purely reimbursements and no profit is involved.