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TDS on service tax

Ashok J (CA Final) (880 Points)

19 August 2010

Is TDS required to be deducted on service tax component.??? Section 194J says TDS to be deducted from any sum paid or credited. We do credit the amount inclusive of Service tax. Any other explanation for not deducting TDS??? Please quote notification or cirular if any......

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sudhakar ca cwa (service) (1518 Points)
Replied 19 August 2010

TDS is required to be deducted on service tax component. as per 194J is taking about gross amount received or receivable and not net amount

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Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 19 August 2010

TDS to be deducted on all payments on service tax components except in case of service tax charged on rent.

Ashok J (CA Final) (880 Points)
Replied 19 August 2010

Thank you for your reply. One more question is whether TDS is to be deducted at contractor's rate or rental rate for the building maintenance charges paid to the landlord???

sudhakar ca cwa (service) (1518 Points)
Replied 19 August 2010

i think 194C is correct. because maintenance is comes under contract only.

there no element of rent here

CA. BIJENDER KR. BANSAL (ACA, B.COM) (8143 Points)
Replied 19 August 2010

CIRCULAR NO 4/2008 , Dated: April 28, 2008

Clarification on deduction of tax at source (TDS) on service tax component on rental income u/s. 194-I of the Income Tax Act.

Representations/ letters have been received in the Board seeking clarification as to whether TDS provisions u/s. 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 194I, tax is deductible at source on income by way rent paid to any resident. Further rent has been defined in 194I 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

(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)

(Ansuman Pattnaik)
Deputy Secretary (ITB)

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Mukund (CA Final (New) Group One Cleared) (177 Points)
Replied 20 August 2010

Refer CIRCULAR NO 4/2008 , Dated: April 28, 2008. Its only for rent that we should not take the service tax component. For other transactions and all we have to deduct tds on service tax also.