Section 194 I

Last updated: 12 September 2008

Court :
CBDT

Brief :
Concession By CBDT On TDS Under Section 194-I Of Income Tax Act

Citation :
Circular No.5/2002

As our hotel members are aware, TDS is deducted on charges paid on hotel rooms by companies and travel agents/tour operators whenever the total amount for the financial year starts to exceed the amount of Rs. 1.20 lakhs. Such companies, including airlines, whose employees stays in the hotel deduct TDS @ 20% while making the payment to the hotel. FHRAI has always held the position that room charges paid in hotels by guests do not come in the category of rent and do not attract TDS under section 194-I of Income Tax Act. Although Central Board of Direct Taxes (CBDT) had given a clarification in 1995 that TDS is to be deducted only when the hotel room is hired on a regular basis, nevertheless in practice they continued to take the interpretation that it is to be deducted in all cases. FHRAI filed a writ petition in the Delhi High Court on this matter and obtained a stay or interim order from the Court, dated 12th April, 1999. The stay is still continuing and our members are benefiting from it. We also continued to press with the CBDT for taking a more legally sound position on this matter. Based on our representations and comprehensive meetings held with them they have now liberlised their interpretation of section 194-I applicable to hotels. We were ably assisted in this exercise by Mr. Lalit Bhasin and his legal firm, Bhasin & Co., New Delhi. We are reproducing below the full orders of the CBDT as conveyed to their field officers. Circular No.5/2002 F.No. 275/27/2001-IT/(B) Government of India, Ministry of Finance Department of Revenue, Central Board of Direct Taxes