19 December 2011
Section 194I deals with TDS on rent. TDS on rent is required to be deducted if the payment exceeds Rs. 1,80,000/- during the year.
TDS rate:
(a) two per cent for the use of any machinery or plant or equipment (b) ten per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings
Further in case PAN no is not provided TDS will have to be deducted at penal rate of 20%. Also TDS to be deducted on amount inclusive of service tax, if any.
The liability to deduct tax at source is on any person except individual and HUF. However, individual and HUF are also covered by liability to deduct tax at source if their books are required to be audited under section 44AB during the immediately preceding financial year. [The turnover from business/profession exceeds the limits specified u/s 44AB during the financial year immediately preceding the financial year in which the rent is paid or credited].
Tds to be deducted on the amount of rent only , i.e. not on service tax amount as per CIRCULAR NO 4/2008 , Dated: April 28, 2008.
Service tax paid by the tenant doesn’t partake the nature of “income” of the landlord. The landlord only acts as a collecting agency for Government for collection of Service Tax. Therefore it has been decided that tax deduction at source (TDS) under sections 194-I of Income Tax Act would be required to be made on the amount of rent paid/payable without including the service tax.
Read more: No TDS on Service Tax element- Rent-U/S 194I http://taxguru.in/income-tax/no-tds-on-service-tax-element-rent-us-194i.html#ixzz1gzLpXZLm
20 December 2011
Thanks for Correction Neha Ji. Wrote inclusive instead of exclusive. TDS Applicable on amount inclusive of service tax except in case of section 194I. As Circular No 4/2008 is applicable only for Sec 194I.
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