16th April, 2016

Sanish P Balan
CEO, Prudent Business Solutions India Private Limited
pbskochi@gmail.com.
KOCHI | KOLENCHERY | MUVATTUPUZHA | PALAKKAD

Service Tax on Renting of Immovable Property

Immovable property is an immovable object, an item of property that cannot be moved without
destroying or altering it. The property is fixed to the earth such as land or a house. Renting of
immovable property includes renting, letting, leasing, licensing or other similar arrangements of the
immovable property. Renting of immovable property does not include renting for a religious body.
Renting of immovable property is a service and it is subject to service tax.
Service tax on rent came into effect from 1st June, 2007. Service tax is not applicable on renting of
vacant land relating to agriculture or renting of residential dwelling for use as residence, property
rented by Reserve Bank of India and property rented by a Government or local authority to a nonbusiness entity. Service tax is obligatory if the total value of services provided exceeds the threshold
limit of Rs.10 lakhs per annum.

Service Tax on Renting of Immovable Property for Residential

Purpose:
There is no service tax charged on renting of immovable property for residential purpose. Service tax
is not applicable to any amount that is refundable and collected from the tenant as security or rental
deposit. Residential dwelling is any residential accommodation but does not include hotel, motel, inn,
guest house, camp-site, lodge, houseboat, or places meant for temporary stay.
Maintenance charge towards the building is subject to service tax. The tenant is liable to pay the
service tax. It is the land owners responsibility to collect the tax amount from the tenant and remit it
to the department.

Service Tax on Renting of Immovable Property by Joint Owners:

A property can be rented in different ways. The property can be owned by a single owner or it can be
owned by joint owners and owned by common owners. Joint owners are only liable for the service tax
on rent received in the individual capacity.

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Threshold Limit for Service Tax on Renting of Immovable

Property:
Assesse should take service tax registration if the value of service exceeds Rs.9Lakhs. Service tax is
mandatory to be paid if the total value of the services provided by the service provider exceeds the
threshold level of exemption is up to Rs.10 lakhs per annum.

TDS on Immovable Property:

Tax deduction at source on rent is liable to be deducted by the person making the payment if the total
amount to be paid during the year exceeds Rs.1,80,000 per annum. This limit is per taxpayer. If there
are 2 co-owners of the asset, the limit would apply for each co-owner. Service tax at 14.5[ Including
SBC] percent is liable to be paid if the total amount received by your landlord from one or more
sources during the year exceeds Rs.10 lakhs.
To avail TDS on rent,

The receiver of the rent shall give his pan card details to the person paying the rent. If the pan card
number is not intimated, then the TDS on rent shall be liable to be deducted at 20 percent.
Surcharge is not applicable on TDS on Rent except where payment is made to a foreign company
and the amount exceeds Rs.1 crore.
Education cess or secondary or higher education cess cannot be additionally charged on TDS on
rent.
If the tenant makes a non-refundable deposit, then TDS will be liable to be deducted in such
deposits. If the deposit is refundable, then no TDS will be deducted on such deposits.
If the tenant pays municipality taxes, ground rent etc., then no tax will be deducted on such amount.

Service Tax Applicable on Rent:

Service tax on rent of immovable property is payable at 14.5 percent from 15th November, 2015 (vide
Notification No. 22/2015ST dated 6 November 2015).

FAQs:
1. What are the cases when service tax on rent is not chargeable?
A. The service tax is not charged on renting of vacant land, with or without a structure relating to
agriculture, renting of residential dwelling units used as residence, renting out of property by
Reserve Bank of India and renting out of property by a Government or a local authority to a nonbusiness entity.
2. What are the exemption from service tax on rent?
A. Service tax is not mandatory if the total value of services provided by the service provided is less
than Rs.10 lakhs and the service tax is exempt on renting of precincts of a religious place meant for
the public, renting of hotel, inn, guest house, club, campsite or other commercial places meant for
residential or lodging purposes whose tariffs are below Rs.1,000 per day.
What is the service tax applicable on rent of immovable property?
A. The service tax on rent of immovable property is payable at 14.5 percent.
3. What is the threshold limit for service tax on renting of immovable property?
A. The threshold limit Rs.10 lakhs per annum.

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4. What is a joint owners service tax liability?

A. When the property is owned by joint owners, all the joint owners are deemed to hold equal share
in the property and they will receive equal share of the rent on the property. Joint owners are only
liable for the service tax on rent received in the individual capacity.

News About Immovable Property

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TDS of 1% for Immovable Property As Per Section 194 IA of the IT Act 1961.
With this real estate in India booming, the sale and purchase of immovable property will see an
addition of TDS of 1% for a value of Rs. 50, 00, 000 and above as per section 194 IA of the IT
Act 1961 with effect from June 2013. This section will require you to have tax deducted at source.
This tax will be applicable for the buyer of the immovable property, and if the seller doesn't have
a PAN then the rate of deduction will be increased to 20%.

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