YES on refundable deposits TDS is applicable @ 10%

Deduct the same

Originally posted by : Deepak Tapse
	In current year FY 12-13 my company paying rent Rs. 15000/- pm i.e. 1.80 Lakhs. In the month of Feb. we are paying Rs. 1 Lakh as security deposit which will be deducted from next 24 months (100000 / 24 = 4167/-) from his rent charges. i.e. Rent Rs. 16500/- less 4167/- = 12233/-. My query is, in current year  i have to deduct TDS on Rs. 2.80 Lakhs (1.80 + 1.00) or not. Thanks

In your case, deposit is adjustable against future rent. Therefore, deposit is in the nature of advance rent subject to TDS. 

 Circular : No. 715, dated 8-8-1995. (Refer Q.22)

[Question 22 : Whether the rent paid should be enhanced for notion­al income in respect of deposit given to the landlord ?

Answer : The tax is to be deducted from actual payment and there is no need of computing notional income in respect of a deposit given to the landlord. If the deposit is adjustable against future rent, the deposit is in the nature of advance rent subject to TDS.]