TDS calculation

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GANESH MENDON

GANESH MENDON (Querist)
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16 April 2009 is the TDS calculated inclusive or Exclusive of TDS????

Dayal

Dayal (Expert)
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16 April 2009 Inclusive for all section other than Rent as rent exclusively exempted by CBDT

CIRCULAR No.4/2008 dated: April 28, 2008

Clarification on deduction of tax at source (TDS) on service tax component on rental income u/s. 194-I of the Income Tax Act.

Representations/letters have been received in the Board seeking clarification as to whether TDS provisions u/s. 194-I of the Income Tax Act will be applicable on the gross rental amount payable (inclusive of service tax) or net rental amount payable (exclusive of service tax).

2. The matter has been examined by the Board. As per the provisions of 194-I, tax is deductible at source on income by way rent paid to any resident. Further rent has been defined in 194-I as

" rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,-

(a) land; or

(b) building (including factory building); or

(c) land appurtenant to a building (including factory building); or

(d) machinery; or

(e) plant; or

(f) equipment; or

(g) furniture; or

(h) fittings,

whether or not any or all of the above are owned by the payee;

3. 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.

4. These instructions may be brought to the notice of all officers working in your region for strict compliance.

5. These instructions should also be brought to the notice of the officers responsible for conducting internal audit and adherence to these should be checked by the auditing parties.

F.No.275/73/2007-IT(B)

(Ansuman Pattnaik)
Deputy Secretary (ITB)

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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16 April 2009 clarification has been sought by Bombay Chamber & commerce & Industry regarding applicability of circular 4/2008 on section 194-J ,and asked the department that whether TDS is to be deducted on service tax collected on the service tax portion collected along with professional services.And it has been replied by the department that scope of clarification issued for section 194-I(RENT) can not be extended for section 194-J(Prof. services).

so conclusion is that
for section 194 I - TDS shall be deducted excluding of service tax as the provision contains the term " any rent" and it is also clerified by the CBDT.

For section 194J: TDS shall be deducted including of service tax as the provision contains the term " any sum payable " and it is also clerified by the CBDT.

for all other section - TDS shall be deducted including of service tax , although it is not specifically clerified by the CBDT but because as the provision contains the term " any sum payable "

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