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Service tax

Kumar-Sujeet (Sr. Accounts Officer) (282 Points)

17 December 2011

any one tell me how service tax is calculated

i work in a company and the compny give rents how we calculate service tax and tds on rent payble

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8 Replies

EKALABYA TALUKDAR (SERVICE TAX CONSULTANT) (666 Points)
Replied 17 December 2011

IF YOUR COMPANY PROVIDES ANY RENT OF IMMOVABLE PORPERTY

SERVICE TAX WILL BE CALCULATED 10% OF THE CHARGEABLE VALUE

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C.A. Sandeep Wawhal (CA, PGDFM, BCom) (1831 Points)
Replied 17 December 2011

Service Tax is calculated by Service Provider and it is 10.3% on Gross Amount. TDS is deducted by a person who paid for it. If Total Amount exceeds180,000/- p. a. then TDS Calculated @ 10% for Immovable property and @ 2% for movable property i.e Plant & Machinery, Equipment etc. u/s 194I of Income Tax Act. Service receiver should paid amount after deducting of TDS.

Note: While Calculating TDS Service Tax Should not be consider in case of TDS on Rent of Immovable property. as per CBDT Cercular.

TDS is calculated at the time of making payment or recording invoice whicherver is earlier.

Regards,

CA Ketan Waghela (Partner at Elite Educare) (356 Points)
Replied 17 December 2011

Sandeep ji,

I agree with your explaination above.

but can you please provide me circular "Calculating TDS Service Tax Should not be consider in case of TDS on Rent of Immovable property. as per CBDT Cercular." or link for the same. I guess it is applicable to corporates only.

Thank you.

CA Prabhat Gupta (Manager (Indirect Taxes)) (821 Points)
Replied 19 December 2011

Circular is produced below for reference:

"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 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)]"

CA Prabhat Gupta (Manager (Indirect Taxes)) (821 Points)
Replied 19 December 2011

For your reference the link to the above Circular is also given below:

https://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=CIR&schT=&csId=971b8564-fdc1-4d9e-9bbe-1b44a969643a&crn=&yr=ALL&sch=&title=Taxmann - Direct Tax Laws

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CA Ketan Waghela (Partner at Elite Educare) (356 Points)
Replied 19 December 2011

Thank you CA Prabhat Gupta for providing the link.

Kumar-Sujeet (Sr. Accounts Officer) (282 Points)
Replied 19 December 2011

if the landlord claim service tax from begining of our payment of rent means

we starts leting the building from may 11 and give monthly payments of rent but on this month he ask for the service tax not only for the month dec but also from the month may. so wht i do i can not understand

and also give the rate of service tax....if we give rent 75,000 pm