TDS applicability

[HARIHARAN mp]

27.12.2011

Dear Sir/Madam,

I am working as the internal auditor of a company. It is working in a rented premises. We have a rental agreement for the rent. Apart from this, we are required to pay monthly usage charges of Airconditioner, generator (both are common facilities to all tenants) and share of monthly maintenance expenses. These expenses are not included in the rental agreement mentioned earlier. My query is that whether the payment of these expenses attract TDS provisions? Please advice.

Expecting a very clear answer.

Thanking You,

Sincerely,

C.A.Hariharan.M.P.

[MOHAN S]

Mr.Hariharan,

Kindly refer to section 194I of Income Tax Act, 1961.. There the "Rent is defined as 'Any payment made by whatever name called for use of any land, building or land appurtenant to a building , machinery etc.'

Thus Tax need to be deucted on the whole amount paid.

[DEV KUMAR KOTHARI]

Expenses for services and facilities is not rent. It depends to use of electricity, and expenses incurred by the person who carry out upkeep and maintenace of building ( even if by landlord- he does so as a contractor or service provider and not as  landlord).

These payments can best be called payment for carrying out work and liable to TDS u/s 194C.

[MOHAN S]

Mr.Kothari, If you look at the section 194I it clearly says "ANY PAYMENT made for use of land, Building" etc. So your view that 'Expenses for services and facilities is not rent" is not found support in law. Although I do agree that it  would create hardship if any one has to deduct tax on expenses like maintenance. But unless the act is amended or the Central Board of Direct Tax issues a circular mitigating the hardship, assessees need to deduct tax on all payments and not only the rent component. Deaprtment is likely to take penal action if any one fails to deduct tax on the entire amount.

[DEV KUMAR KOTHARI]

Please see words ... any income by way of rent.... in section 194I and

 

 Rent means any payment ... for the use of land,...    in explanation ...

 

Electricity payment, upkeep and maintenace etc are not for use of land, building... but these are for maintainng building which can be by tenant, landlord or any other agency.

 

These services cannot be let out by way of lease, sub-lesase, tenacny etc.These services are carried out. Only property can be let out by way of lease, sub-lease, tenancy ...

 

Suppose landlord has agreed to provide cleaning services even inside the property let out. He will charge only when he has carried out cleanign activity and not when he does not clean the space. Suppose office is closed for two months, tenat will have to pay rent for space but not for cleaning services.

AI Summary

TDS on rent-related payments may cover service and maintenance charges, requiring deduction under rent or contract provisions. Whether TDS applies to payments for shared utilities and maintenance alongside rent is disputed: one position treats such payments as rent falling within the statutory definition and requiring tax deduction on the entire amount, exposing payers to penalty risk; the contrary position treats electricity, upkeep and cleaning as payments for services subject to contract-payment withholding rules rather than rent-based TDS, and highlights the need for legislative or administrative clarification.