Payment to hotel (TDS)
This query is : Resolved
14 May 2009
Sir,
A company paid a sum of Rs. 209897 to a hotel accomodation and fooding for five days.
If fact i am talking about a clarification issued by the department that contains hotel is taken on regualar basis.
My question is what is regular basis.
Should a company deduct TDS thereon u/s 194I.
A company paid a sum of Rs. 209897 to a hotel accomodation and fooding for five days.
If fact i am talking about a clarification issued by the department that contains hotel is taken on regualar basis.
My question is what is regular basis.
Should a company deduct TDS thereon u/s 194I.
14 May 2009
If it paid for catereing service, then TDS should be dedecuted under 194C.
14 May 2009
Please clarify in detail, situation is a little bit different
09 August 2024
In the context of TDS on payments made to hotels, it's important to understand the applicability of Section 194I of the Income Tax Act and how it relates to such payments.
### **TDS on Payment to Hotels under Section 194I**
**1. Applicability of Section 194I:**
Section 194I deals with TDS on rent, including rent for the use of land, building, machinery, plant, or equipment. Specifically:
- **Subsection 194I:** TDS is required to be deducted on payments made for rent of land, building, or plant and machinery.
**2. Regular Basis Clarification:**
The term “regular basis” generally implies that if a company regularly or recurrently makes payments to a hotel for services such as accommodation or food over a period of time, the payment may fall under the category of "rent" as per the provisions of Section 194I.
**For instance:**
- **Regular Basis:** If a company frequently uses hotel services for accommodation or other purposes, such as every month or on a regular contractual basis, it is likely considered regular usage.
- **Occasional Basis:** If the payment is a one-time or occasional event, it might not be classified as “regular basis” and thus may not be subject to TDS under Section 194I.
**3. TDS Deduction under Section 194I:**
Given that the payment is for accommodation and food for a period of five days, it is crucial to determine if the payment falls under the category of rent:
- **If the payment is for accommodation or a stay at the hotel, it falls under the definition of rent, and TDS should be deducted under Section 194I.**
- **If the payment is strictly for food and other non-accommodation services, TDS under Section 194I may not apply, as it specifically deals with rent for land or buildings.**
**4. TDS Rate:**
- **For Rent of Buildings:** The rate is 10% for individual and Hindu Undivided Families (HUF) and 40% for others.
- **For Rent of Machinery, Plant, or Equipment:** The rate is 2% for individual and HUF and 40% for others.
### **Summary of Actions:**
1. **Determine the Nature of Payment:**
- If the payment includes rent for accommodation (hotel stay), then Section 194I applies.
- If the payment is purely for food and other services, Section 194I might not be applicable.
2. **Assess Regularity:**
- Payments on a “regular basis” suggest a recurring arrangement and could imply regular use, making Section 194I applicable.
3. **Deduct TDS Accordingly:**
- For accommodation (if applicable), deduct TDS at the applicable rate under Section 194I and ensure compliance with filing requirements.
4. **Document and Report:**
- Maintain proper documentation of payments and TDS deductions and report them in TDS returns using Form 26Q.
**Consultation:**
For precise application and to address specific scenarios, consulting with a tax advisor or legal professional is recommended, especially if there are nuances in the nature of payments or regularity.
### **TDS on Payment to Hotels under Section 194I**
**1. Applicability of Section 194I:**
Section 194I deals with TDS on rent, including rent for the use of land, building, machinery, plant, or equipment. Specifically:
- **Subsection 194I:** TDS is required to be deducted on payments made for rent of land, building, or plant and machinery.
**2. Regular Basis Clarification:**
The term “regular basis” generally implies that if a company regularly or recurrently makes payments to a hotel for services such as accommodation or food over a period of time, the payment may fall under the category of "rent" as per the provisions of Section 194I.
**For instance:**
- **Regular Basis:** If a company frequently uses hotel services for accommodation or other purposes, such as every month or on a regular contractual basis, it is likely considered regular usage.
- **Occasional Basis:** If the payment is a one-time or occasional event, it might not be classified as “regular basis” and thus may not be subject to TDS under Section 194I.
**3. TDS Deduction under Section 194I:**
Given that the payment is for accommodation and food for a period of five days, it is crucial to determine if the payment falls under the category of rent:
- **If the payment is for accommodation or a stay at the hotel, it falls under the definition of rent, and TDS should be deducted under Section 194I.**
- **If the payment is strictly for food and other non-accommodation services, TDS under Section 194I may not apply, as it specifically deals with rent for land or buildings.**
**4. TDS Rate:**
- **For Rent of Buildings:** The rate is 10% for individual and Hindu Undivided Families (HUF) and 40% for others.
- **For Rent of Machinery, Plant, or Equipment:** The rate is 2% for individual and HUF and 40% for others.
### **Summary of Actions:**
1. **Determine the Nature of Payment:**
- If the payment includes rent for accommodation (hotel stay), then Section 194I applies.
- If the payment is purely for food and other services, Section 194I might not be applicable.
2. **Assess Regularity:**
- Payments on a “regular basis” suggest a recurring arrangement and could imply regular use, making Section 194I applicable.
3. **Deduct TDS Accordingly:**
- For accommodation (if applicable), deduct TDS at the applicable rate under Section 194I and ensure compliance with filing requirements.
4. **Document and Report:**
- Maintain proper documentation of payments and TDS deductions and report them in TDS returns using Form 26Q.
**Consultation:**
For precise application and to address specific scenarios, consulting with a tax advisor or legal professional is recommended, especially if there are nuances in the nature of payments or regularity.
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