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TDS - whether deductive on service tax component

CS Yogesh Sachdeva (Manager (Legal) & Company Secretary) (80 Points)

01 September 2009

Whether tax is deductible at source on the service tax component or is to be deducted only on the net amount derived after reducing the service tax component. The service provided is development of website by a vendor to assessee.

I have also read circular 4/2008 of CBDT, calrifying that TDS is not liable to be deducted on the service tax component but only the income component, but that pertains only to section 194-I.

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5 Replies

Sorabh Gupta (Manager ( Taxation )) (877 Points)
Replied 01 September 2009

Dear Yogesh

Generally TDS is deducted on " AMOUNT PAYABLE" before the intoduction of circular 4/2008 as mentioned by you. But after the introduction it has been cleared that as per the provision of section 194J " Any Person responsible for paying rent to a resident is required to deduct TDS" and Rent means

rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of land , building , Plant & machinery , furniture & fittings,

And one thing is that 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 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.

So as per circular Any Amount payable means RENT as defined above but in other section ie. 194C,194J "AMOUNT PAYABLE" means any amount paid to payee in other words " GROSS AMOUNT" paid to payee. So in other section TDS is deductible on GROSS AMOUNT inclusive of service tax.

Hope ur doubts has been cleared.

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Mehul Lodaria (CA) (69 Points)
Replied 01 September 2009

As per Notification by CBDT for the purpose of 194J the TDs is not to be made on amt of Service tax, however for rest of the section of TDs it is advisable to deduct the TDS

CS Yogesh Sachdeva (Manager (Legal) & Company Secretary) (80 Points)
Replied 02 September 2009

Thanks Mr. Mehul & Sorabh.

Mr. Mehul, can I also have the notification no. for 194J. - Thanks, Yogesh

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 06 September 2009

TDS on service tax not to be deducted only in Section 194I only. Rest all of the sections are liable for deduction of TDS on service tax. I think Mr. Mehul has by mistake typed "194J" instead of "194I"