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TDS on Hotel/ Guest House payment

Pradeep Jain (service) (143 Points)

18 November 2009

Hi,

Please clarify TDS on Hotel/ Guest House payment in the following two cases:

1) If we have any type of contract (Rate/ Occupancy) with a hotel.

2) If we don't have any contract with a hotel, just using hotel room on requirement basis.

Regards

Pradeep Jain

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7 Replies

RITESH KOTHARI (B.COM, FCA, DISA(ICAI)) (778 Points)
Replied 18 November 2009

IN 1ST CASE U HAVE TO DEDUCT TDS U/S 194I.

IN 2 ND CASE THERE IS NO LIABILITY TO DEDUCT TDS.

Pradeep Jain (service) (143 Points)
Replied 18 November 2009

Actually I was confused with recent judgement of High court in the same issue which states that no TDS to be deduct in case of hotel payment.

If we have occupany contract not rate contract than 194I would be applicable?

Pradeep Jain (service) (143 Points)
Replied 18 November 2009

Actually I was confused with recent judgement of High court in the same issue which states that no TDS to be deduct in case of hotel payment.

If we have occupany contract not rate contract than 194I would be applicable?

Sunil (Trader) (2611 Points)
Replied 18 November 2009

In case of rate contract there is no TDS as per department circular 5/2002 if there is no committment to earmark a certain room or guarantee an accomodation on a regular basis. For agreement to make available room on regular basis there is TDS u/s 194I.

For casual occupany when you are reimbursing the individual employee or professional who himself pays the bill and collects from you, you do not have to deduct TDS. However, if the individual / professional is audited u/s 44AB he has to deduct TDS if payment towards room charges for the year exceeds Rs.120,000 (including the taxes and levies).

Therefore companies whose employees stay on casual basis do not have to deduct TDS when you reimburse. However a businessman or professional subject to audit who pays more than 120,000 a year even on casual basis has to deduct TDS @ 10% or if he bears it from his pocket then 12.5 % if the PAN number of hotel is available or 25% if PAN number is not given by the hotel. If he stays say at Taj group of hotels collectively at all their properties at various dates in a year, payment to each hotel in the group will be combined to determine the applicability. This is irrespective of whether stay is for business/profession or personal expense. If an audited individual is reimbursing his employee or professional who is not audited for any of the casual stays, then there is no applicability of TDS.

However, many individuals subject to 44AB audit misinterpret provisions and do not deduct TDS for their personal holidays even if it exceeds the limit.

Y.N.Vinod (Consultant - Risk Advisory Services) (98 Points)
Replied 04 June 2010

As per Circular 715 dt 1995, TDS should be deducted on hotel charges if they were occupied on a regular basis.What does the term "regular basis" means.

Y.N.Vinod (Consultant - Risk Advisory Services) (98 Points)
Replied 04 June 2010

If 10 of my employees went to a hotel and stayed in the hotel for some time. The hotel bill amount came to Rs.6,00,000/-. Each of the employees paid the hotel seperately and got it reimbursed from the company.Is the reimbursement taxable.

In the same case, if the rooms were arranged by the company and the bill was cleared by the company directly, Is TDS applicable.

Rahul Kulkarni (Sales Manager) (57 Points)
Replied 05 June 2010

Mr. Vinod

Yes, TDS is applicable u.s. 194C.

I don't agree to Ritesh Kothari, See, If the Company has a written contract with the Hotel for Hospitality for Employees or Guests then the TDS should be deducted u.s. 194C.

Cause the Hotel is used on contractual basis not on rental basis. Means what, whenever need the rooms of Hotel are utilised not on daily basis. If the Agreement says the Hotel will be used for Daily Basis then TDS must be deducted u.s. 194I.

But the Company has the pure written Contract with the Hotel.

In 2nd case Ritesh is right, no need of deduction of TDS.

Rahul