TDS on user charges

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CS Ashish Jain (Querist)
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22 May 2010 We are a pvt. ltd. company and entered into an agreement with an another pvt. ltd. company to use their plant & Machinery with the land & building for the production purposes for the next 10 years. As a consideration we are paying them Rs.1 Lac per month in the name of user charges.

My question is that whether TDS to be deducted by us from the user charges and what will be the rate of TDS.

Shyam Lal Naik

Shyam Lal Naik (Expert)
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22 May 2010 The transaction is covered under section 194I. The user fee falls under "Rent" as defined under explanation (i) to the said section.

The rate is 2% for use of Plant & Machinery and 10% for use of land & Building.

Since, your case is a composite contract/arrangement, it shall be safer to deduct TDS @ 10%.