We manage a Hostel / PG within a rented space. However, there's a current legal dispute regarding the ownership/landlordship of the building. This matter is currently undergoing a legal process, as directed by the court. The court's instruction mandates us to place our rent payments into a court-held deposit until the ownership issue is resolved. Due to the ongoing ownership dispute, we are seeking clarification on how to handle TDS from the rent payments. Specifically, we are uncertain whether we should deduct TDS from the rent payments or remit the entire rent amount to the court. This confusion arises from the contested ownership status. In case TDS deduction is deemed necessary, we are unsure about whose PAN to utilize for the deposit, considering the disputed ownership status. Furthermore, we are also seeking guidance on how to avoid any potential disallowance of the "provision for rent expenditure." We are keen to understand the appropriate steps to take in order to prevent any issues related to this provision, given the circumstances.
You can take a stand that the land was under dispute and hence TDS was not deducted. You can deduct and deposit TDS as and when the dispute is over.
You can read below mentioned article: https://www.taxmanagementindia.com/web/View_discussions_detail.asp?ID=4619
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Thank you.
Hi
It is advisable to deduct TDS before making the payment of the rent. Challans need to be submitted which will not contain the pan of the landlord. The TDS returns can be revised once the legal dispute is over.
We can discuss further.
Below are the options available to you
Option 1
Disallow 30% of rent expense and claim it in a FY when you actually deduct and deposit it
Option 2
TDS on rent is deductible if aggregate payment of rent exceeds Rs.2.40 lacs in a financial year. If rent agreement is with more than 1 owner of the property then limit of Rs. 2.40 lacs is applicable to each owner subject to each owner having definite and ascertainable share in the property
Option 3
Apply to Income tax department for determination of ownership of the property
For detailed discussion you may opt for phone consultation
Dear Naman Maloo , You have told me refer to https://www.taxmanagementindia.com/web/View_discussions_detail.asp?ID=4619 Can you details about IDBI Vs ITO[2006]104TTJ230 Mum as I am unable fine the details
Hello,
Given your situation involving the ongoing legal dispute over ownership and the court's directive to deposit the rent payments in a court-held account, there are several approaches to consider regarding TDS (Tax Deducted at Source) and the provision for rent expenditure. Here are the viable options.
Navigating the disallowance of the "provision for rent expenditure" under these circumstances requires careful consideration.
By choosing the most suitable option from these suggestions and potentially seeking expert advice, you can navigate the complex situation surrounding TDS deduction and rent expenditure provision more effectively.
Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.
Thank you.
Shubham Goyal
