Should TDS Be Made On Payment of Rent To Municipal Authority?
March 13, 2009 by taxworry · Leave a Comment
From our company, We are paying rent to Municipality owned building. Is TDS on Rent exempted, as Municipality is Local Governing body and does not come under Government directly. We have issued the TDS, but the Municipality is refusing to accept the same and wants the full rent to be paid. Kindly clarify. Jagannadham Chetty, Noida
Yes, the municipal authority are out of tds provision because their income is exempt. Since in your case the issue is Rent , no tax should be deducted. This was clarified by a CBDT Circular no 699 dt 30/1/1995 which states as under:
4. In view of the aforesaid, there is no requirement to deduct income-tax at source on income by way of ‘rent’ if the payee is the Government. In the case of the local authorities and the statutory authorities referred to in para 3 of this circular, there will be no requirement to deduct income-tax at source from income by way of rent if the person responsible for paying it is satisfied about their tax-exempt status under clause (20) or (20A) of section 10 on the basis of a certificate to this effect given by the said authorities.
Complete circular can be downloaded from here.
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