TDS on Tax

This query is : Resolved

Rohit ROHIT (Querist)
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29 April 2009 Dear Sir

this is with ref to CBDT circular 4/2008, it says that no TDS U/S 194-I to be decuted on total billing inclusive STAX. Claiming that TDS is applicable only on Income. however STAX is not his income.

like this, shall i need not to deduct TDS on Service Tax - U/S -194- (C) & (H) & (J)
.If you have any circular regarding no tds on TAX pls advice

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)
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29 April 2009 Normally TDS should be deducted on ST part. please mention the ciruler wordings here.

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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29 April 2009 Section 194I talks about the income while the other section like 194C,H and J talk about the payment made to respective persons under these sections. So any payment made under section 194C,H and J will required to deduct TDS inclusive of service tax.

If you read the below circular carefully, it is clearly mentioned that you dont need to deduct TDS on service tax. See para 3.

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CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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29 April 2009 Clarification on deduction of tax at source (TDS) on service tax component on rental income under section 194-I of the Income-tax Act

CIRCULAR NO. 4/2008, DATED 28-4-2008

Representations/letters have been received in the Board seeking clarification as to whether TDS provisions under section 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 doesnt 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.

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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29 April 2009 So no need to deduct TDS on service tax part.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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29 April 2009 Circular 4/2008 dated 28/4/2008 is only for 194I. So for other sections tax is to be deducted on the gross amount of the bill inclusive of service tax.

taxindiaconnect

taxindiaconnect (Expert)
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01 May 2009 Summry of the circular no 4 - The CBDT decided that the 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. Further, the service tax paid by the tenant would not be considered as income of the landlord, hence, the tax was deductible at source on income by way of rent paid to any resident. I agree with B.C. as this is only in respct of section 194I payment.