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Tds on hotel rent and food

N V SUNDARARAJAN (ACCOUNTANT) (34 Points)

08 February 2017

ANY ONE GUIDE ME THAT TDS % ON HOTEL RENT BILL INCLUDING FOOD. HOW MUCH % TO BE DEDUCT ON TDS AND WHICH HEADING 194I OR 194C.

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10 Replies

Bablu Kumar Jha (Accounts Manager) (266 Points)
Replied 08 February 2017

Hi Mr. N.V. Sundararajan,

Payments made by persons, other individuals and HUFs for hotel accommodation taken on regular basis will be in the nature of rent subject to TDS under section 194-I.,

Please have a look below circular :

Circular : No. 715, dated 8-8-1995.

Clarification regarding question No. 20

1. Circular No. 715 dated 8-8-1995 has been issued by the Central Board of Direct Taxes to clarify various provisions relating to tax deduction at source under various provisions of the Income-tax Act. Question No. 20 of the aforesaid Circular related to applicability of the provisions of section 194-I of the Income-tax Act in respect of payments made to a hotel for rooms. The relevant question and answer is reproduced below :—

". . . Q. No. 20 : Whether payments made to a hotel for rooms hired during the year would be of the nature of rent?

Ans. : Payments made by persons other than individuals and HUF for hotel accommodation taken on regular basis will be in the nature of rent subject to TDS under section 194-I." [Emphasis supplied]

In this context, doubts have been raised as to what constitutes "hotel accommodation taken on regular basis" for the purpose.

2. The Board have considered the matter. First, it needs to be emphasised that the provisions of section 194-I do not normally cover any payment for rent made by an individual or HUF except in cases where the total sales, gross receipts or turnover from business and profession carried on by the individual or HUF exceed the monetary limits specified under clause (a) or clause (b) of section 44AB. Where an employee or an individual representing a company (like a consultant, auditor, etc.) makes a payment for hotel accommodation directly to the hotel as and when he stays there, the question of tax deduction at source would not normally arise (except where he is covered under section 44AB as mentioned above) since it is the employee or such individual who makes the payment and the company merely reimburses the expenditure.

Furthermore, for purposes of section 194-I, the meaning of ‘rent’ has also been considered. "‘Rent’ means any payment, by whatever name called, under any lease . . . or any other agreement or arrangementfor the use of any land. . . ." [Emphasis supplied]. The meaning of ‘rent’ in section 194-I is wide in its ambit and scope. For this reason, payment made to hotels for hotel accommodation, whether in the nature of lease or licence agreements are covered, so long as such accommodation has been taken on ‘regular basis’. Where earmarked rooms are let out for a specified rate and specified period, they would be construed to be accommodation made available on ‘regular basis’. Similar would be the case, where a room or set of rooms are not earmarked, but the hotel has a legal obligation to provide such types of rooms during the currency of the agreement.

3. However, often, there are instances, where corporate employers, tour operators and travel agents enter into agreements with hotels with a view to merely fix the room tariffs of hotel rooms for their executives/guests/customers. Such agreements, usually entered into for lower tariff rates, are in the nature of rate-contract agreements. A rate-contract, therefore, may be said to be a contract for providing specified types of hotel rooms at pre-determined rates during an agreed period. Where an agreement is merely in the nature of a rate contract, it cannot be said to be accommodation ‘taken on regular basis’, as there is no obligation on the part of the hotel to provide a room or specified set of rooms. The occupancy in such cases would be occasional or casual. In other words, a rate-contract is different for this reason from other agreements, where rooms are taken on regular basis. Consequently, the provisions of section 194-I while applying to hotel accommodation taken on regular basis would not apply to rate contract agreements.

Circular : No. 5/2002, dated 30-7-2002.

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Bablu Kumar Jha (Accounts Manager) (266 Points)
Replied 08 February 2017

If individual / HUF, hire Hotels Rooms for regular basis during the financial year TDS would be liable @ 10% as per section 194 I, If taken hotel rooms for short time, it cannot liable for TDS.

N V SUNDARARAJAN (ACCOUNTANT) (34 Points)
Replied 08 February 2017

HOTEL ROOM TAKEN FOR CONFORENCE FOR THREE DAY WITH FOOD THEN TDS 10% ON RENT IS APPLICABLE

Bablu Kumar Jha (Accounts Manager) (266 Points)
Replied 08 February 2017

No,

No TDS would be applicable on space taken for conferences occasinally in a hotels and Foods because in terms of the deparment's circular that foods serving by the restaurent does not comes under the perview of the section 194C.

Thanks.

N V SUNDARARAJAN (ACCOUNTANT) (34 Points)
Replied 08 February 2017

IF THE CONTRACT MENTIONED FOR THREE DAYS EVENT THEN, TDS IS APPLICABLE.

PLEASE ADVICE. THEY HAVE CHARGED FOR SERVICE TAX 15%

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Bablu Kumar Jha (Accounts Manager) (266 Points)
Replied 09 February 2017

Dear Mr. Rajan,

If the service provider is a Hotel in that case TDS not applicable, if service provider is a Even-Management compancy than TDS would be liable under section 194C.

Kartikey Jain (Intern) (2382 Points)
Replied 04 July 2018

Application of TDS provisions on payment made for Hotel accomodation is dependent on 'regularity' of the transaction. If an assessee other than Individual/HUF is regularly availing the accomodation services by a hotel, it shall have to deduct TDS u/s 194-I @ 10%. No deduction of TDS is to be made if the condition of "regularity" is not present.

Also, if the assessee is making payment to an event management company instead of the hotel directly, it shall have to deduct TDS u/s 194C.

Kartikey Jain (Intern) (2382 Points)
Replied 04 July 2018

Also, if the assessee is making payment to an event management company instead of the hotel directly, it shall have to deduct TDS u/s 194C.

1 Like

venu (Assistant Manager - Accounts & Legal) (29 Points)
Replied 10 July 2018

Hi Karthik,

The XYZ Company base location is in India, few employees been to south korea for training, for them accomodation, food & local conveyance provided by the South korean Hotel .

While making the payment to hotel, will it attract TDS, if yes, please update me the TDS percentage & which section we need to deduct the TDS

Thanks in Advance.

Regards,

K Venugopal.

Ph:-+91 9035190378

1 Like

Vivek Kushwaha (2 Points)
Replied 08 August 2018

ANY ONE GUIDE ME THAT TDS % ON HOTEL RENT BILL INCLUDING FOOD. HOW MUCH % TO BE DEDUCT ON TDS AND WHICH HEADING 194I OR 194C. and how to Set of GST Amount and Bill on bifurcation For Exp: