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Tds on rent

Mayank Kapoor (.) (159 Points)

13 January 2012

I have a query regarding the category of TDS on rent.

I have an agreement to pay rent in which there are two clauses:

1. Fixed rent of Rs 1,00,000 upto sales of Rs 25,00,000 , and

2. 5% of the sales above Rs 25,00,000.

My question is:-

1.)while paying the 5% , what will be the category under which i deduct TDS ( Commission or rent) ?

2.)what will be the applicable rate?

An early reply would be appreciated.

Regards

Mayank kapoor

09871009350

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23 Replies

Vineet Goyal (Assistant Manager - Finance & Accounts) (702 Points)
Replied 13 January 2012

If the agreement says you are required to pay the 5% as rent, then TDS will be deducted u/s 194I.

1 Like

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C.A. Sandeep Wawhal (CA, PGDFM, BCom) (1829 Points)
Replied 13 January 2012

This is fall under Section 194H of Income Tax Act as TDS on Comission, but please elaborate this point regarding rent for better understanding.........

Yogesh Bhandari (CA FINAL Student) (429 Points)
Replied 13 January 2012

As per my view, it should be considered as rent and rate of TDS on rent will be applicable. Further, Sec. 194I contains any type of rent and it is the rent based on sales.. It is not commission as there is no service includes

1 Like

C.A. Sandeep Wawhal (CA, PGDFM, BCom) (1829 Points)
Replied 13 January 2012

There are two types of Rent which are come under the provision of TDS under Income Tax Act i.e. 1.)TDS on Rent on Land and Building

2.) TDS on Plant and Machinery/ Equipment

There is we can understand that tds on rent is applicable on tangible asset whether movable or immovable and hence mere agreement regarding payment of rent in any services or job which is intangible in nature is not fall under this catagory.

1 Like

Mayank Kapoor (.) (159 Points)
Replied 13 January 2012

In the agreement it is written that if the sales of my firm crosses the level of Rs 25,00,000, i will pe paying 5% of the amount above 25,00,000 as rent. I am just confues whether it will be treated as commission or rent.

For Vineet :- In the agreement it is written "as rent"

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Mayank Kapoor (.) (159 Points)
Replied 13 January 2012

Sandeep the rent is for the building.

Prity (Partner) (70 Points)
Replied 13 January 2012

Is the rent paid for use of any premises where sales is made.

If this is so then, TDS will be deducted as per sectio 194I.

As per the terms of the agreement descibed by you,

Total rent in case of sales exceeding 25 lacs, will be Rs. 100000+(5% of amount above 25 lacs.).

Rates(with effect from 1st oct, 2009)

for the use of machinery, plant or equipment 2%

for the use of land, bldng., furniture or fittings 10%

Thanks.

2 Like

Mayank Kapoor (.) (159 Points)
Replied 13 January 2012

Exactly Prity , these are the terms of agreement.

Thank you for your inputs.

C.A. Sandeep Wawhal (CA, PGDFM, BCom) (1829 Points)
Replied 13 January 2012

I have extracted this portion from I.T. Act as under.........

Explanation.—For the purposes of this section,—
76[(i) “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;]