Service Tax on Commercial Rentals

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  1. Satishg

    Satishg New Member

    I understand that Service Tax is applicable when commercial rentals from a property exceed Rs. 10.00 Lakhs in a financial year post deduction of property Taxes paid. My question is, what happens when the commercial property is jointly owned by two people and the individual share of rentals does not exceed Rs. 10.00 Lakhs in a financial year, but for the property as a whole, the total rentals exceed Rs. 10.00 Lakhs in a financial year. Will Service Tax become applicable in this case?
     
  2. Neha Sharma

    Neha Sharma Active Member

    In case the individual share of rent does not exceed Rs. 10 Lakh, Service Tax would not be applicable in this case.

    The limit of 10 Lakh for applicability of Service Tax is per person.
     
  3. Satishg

    Satishg New Member

     
  4. Satishg

    Satishg New Member

    ThanksNeha. Isn't this a loophole in the regulation. People can easily. Create multiple owners to avoid service tax. Can you send me some link to the regulation which clearly says that this limit is per individual and not per property. That way if an individual is earning rent more than 10 lakhs from multiple properties then is he liable for service tax?. Also is there exemption from this provision for rent from residential properties?
     
  5. Neha Sharma

    Neha Sharma Active Member

    Dear Satish

    Creating multiple owners is not that easy (unless they are not family members) because buying property involves a lot of capital outlay.
     
  6. Neha Sharma

    Neha Sharma Active Member

    In case there are separate owners, the lay treats them as different taxpayers having different PAN Card and Service Tax Registration and therefore the limit being per person is justified.

    The following is the official link where it is stated that limit is person. Limit increased from 4 Lakh to 8 Lakh to 10 Lakh per person

    1. http://www.servicetax.gov.in/notifications/notfns-2k5/st06-2k5.pdf
    2. http://www.servicetax.gov.in/notifications/notfns-2k7/st04-2k7.pdf
    3. http://www.servicetax.gov.in/notifications/notfns-2k8/st08-2k8.

    For simpler language, refer point 3 on the following link of Economic Times, wherein it states that the limit of 10 Lakhs is for each service provider and not as a whole

    Refer: http://articles.economictimes.india...599015_1_wealth-tax-service-tax-rental-income
     
  7. Satishg

    Satishg New Member

    Thanks for the detailed reply. Can also clarify on my last point whether service tax is applicable on residential property rent and whether all the rent received is to be aggregated at individual level from multiple properties?
     
  8. Neha Sharma

    Neha Sharma Active Member

    1. Service Tax on Rent from Residential Property is exempted from the levy of Service Tax

    2. Rent received by a person from all the properties is to be aggragated and if the total rent received or receivable during the year is less than 10 Lakhs, Service Tax wont be applicable. If the total rent is more than Rs. 10 Lakhs, Service Tax would be applicable
     
  9. Satishg

    Satishg New Member

    Thanks again for your quick reply. I am indeed impressed by your promptness and professionalism. Basis your replies I am convinced that your profile credentials that are displayed need corrections. All the best in your professional pursuits.
     
  10. Satishg

    Satishg New Member

    Forgot to ask, are you a practicing professional? Or is it just a hobby
     
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