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Should i deduct tds including service tax

Kamal Pal (Dy. Mgr. Accounts) (128 Points)

07 May 2012

Dear All,

I want to know if i should deduct tds including service tax or deduct with including it. There are two of them in which i am little confused these are Rent on Machinery and Rent on Building. Where % of TDS on Machinery is 2 and 10 on building.

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17 Replies

M .K. Jha (CA Final) (484 Points)
Replied 07 May 2012

Dear Kamal,

You Should deduct TDS on Gross amount excluding S.tax. it means

Service Tax = (Amount + TDS)*12.36%

and

TDS = (Amount paid + TDS)* TDS Rate (i.e.2% / 10%)

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CA Akshay Kumar Mishra (Chartered Accountant ) (1784 Points)
Replied 07 May 2012

CBDT Circular: CIRCULAR NO. 4/2008, (dated 28.04.2008) Representation / letters have been received in the Board seeking clarification as to whether TDS provisions under Sec. 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 ) 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. 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 TDS under Sec 194-I of Income-tax Act would be required to be made on the amount of rent paid / payable without including the service tax.

Regit (CA.Final) (320 Points)
Replied 08 May 2012

Agree with akshy.

In 194I, it was clearly stated that 'TDS on Income'. So, ST portion is not an income to the landlord.

Where as in case of 194J, it was stated that 'TDS on Amounts received'. So as it is clearly stated to deduct TDS on AMOUNTS RECEIVED, above logic will not apply and there fore, TDS is deductible.

Mihir Doshi (B.Com, CA, CS, LLB) (2187 Points)
Replied 08 May 2012

Agree with Akshay,

Kindly refer the wording of section 194I and another deducting section i.e. 194C, J etc....These sections speak about "Any sum payable" while 194I speaks about "ANy Income".

These two terms are clearly distinguishable and denotes different meaning.

Hope your query is now resolved.

For 194I purpose, TDS will be on only rental amount and not on service tax amount.

Thanks

Mihir Doshi

4 Like

CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 08 May 2012

1 Like

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DIBYENDU (SERVICE) (266 Points)
Replied 08 May 2012

is TDS deducted u/S 194B, 194D, 194G, 194H aslo charge on gross amount (i.e. exclusive amount of service tax) as they are also charged on income?

CA Akshay Kumar Mishra (Chartered Accountant ) (1784 Points)
Replied 08 May 2012

In case of TDS u/s 194D 194G 194H TDS shall be deducted on AMOUNT EXCLUSIVE OF ST whereas, in case of TDS U/s 194C 194 J TDS shall be deducted on AMOUNT INCLUSIVE OF ST

Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
Replied 08 May 2012

In case of TDS on Rent i.e. u/s 194I, on amount exclusive of service tax. In all other cases, on gross amount, i.e. amount inclusive of service tax.

1 Like

CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 08 May 2012

YES AGREE WITH ABOVE.....

CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 08 May 2012

BUT U/S 194 I.....NOT J AS MENTIONED ABOVE.

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Rajesh Kumar Agrawal (Sr Executive) (21 Points)
Replied 12 May 2012

Could some one quote an example for the same.

For example:

Rent Rs 100,000 pm

Service tax =100,000*12.36%=12,360

Gross Total = 112,360

TDS would be =?? 112,360*2% or 100,000*2%

i think it should be 2,000 and balnce sould be paid 110,360.

Please clarify

pooja (Article) (21 Points)
Replied 05 October 2012

But why should tds be deducted on service tax? Its not the income for the person who is charging service tax. He is just collecting service tax to pay to central government.

Mihir Doshi (B.Com, CA, CS, LLB) (2187 Points)
Replied 06 October 2012

Dear Member,

Circular No. 4/2008 states that TDS should not be made on service tax element of rent. Since the circular specifically mentions rent, there wont be TDS deduction on service tax portion wrt RENT 194 I Only.

In other sections, it explicitely written that TDS is deducted on "ANY SUM" which includes Taxes also....while 194I speaks about "Any INCOME". Hope you can understand the concept.

Thanks

Mihir Doshi

Shwetha Krishnan (Accounts & Audit Executive) (35 Points)
Replied 22 November 2012

Does the above rule applies only to rent?

Or is that applicable to all? eg. For House keeping services - the company charges service fee + Service tax-- should we deduct TDS only on service fee part? or should we deduct from Gross amount (including Service Tax)?