Dear Sir, The maintenance charges levied in a Flat is paid by the Tenant, To whom the Receipt is to be issued - To the Tenant or Flat Owner. What are the Tax implication ? The full details are narrated below:
Maintenance Charges
There is an Apartment consisting of 50 Flats. The maintenance activities relating to the complex ( the Apartment) is looked after by The “Asssociation of Flat Owners” and they collect Rs.3000 per month as maintenance charges and every Flat owner is to pay the charges as per the Bye Laws of the Association.
One Flat owner lets out his Flat on a monthly rent of Rs.23000. As per the leave and licence agreement, The Tenant has agreed to pay the Rent to the Flat owner and the maintenance charges of Rs.3000 to the Association.
From Income Tax Angle. – Analysis.
Qn. The receipt for the payment of Rs.3000 has to be issued in whose name?
In the name of: (OPTIONS)
- The Tenant ( because he is making the payment) OR
- Flat owner ( because he is responsible for that payment as per bye laws).
In the case of b) above, it can be interpreted as – Flat owner receives the maintenance charges of Rs. 3000 from the Tenant (in addition to the Rent of Rs.23000) and later or same day it is paid to the Association through the Tenant.
In such a situation, the Income to the Flat owner will be Rs, 23000 by Rent and another Rs, 3000 ( for maintenance charges) and the Total will be Rs, 26000.
If the Flat owner has to avoid the tax on the additional amount of Rs.3000 – the maintenance charges, the prudent step will be to issue the receipt for maintenance charges paid, in the name of the person who is actually (enjoying the benefits of maintenance) paying the amount.
Clarification sought in whose name the Receipt has to be issued with a discussion about tax implications on the twin options
V.S.Rajamani
CAclubindia
