Section 194-I l Rent
Circular No. 699 was issued by the Central Board of Direct Taxes on 30 January 1995. Its subject is Section 194-I l Rent.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Deals with rent paid to the Government and to tax-exempt authorities under section 194-I. No deduction is required on sums payable to the Government at all, section 196 saying so. For an authority whose income is exempt under section 10(20A), being one constituted by or under a law for housing accommodation or for the planning, development or improvement of cities, towns and villages, and for a local authority whose income under 'Income from house property' or 'Income from other sources' is exempt under section 10(20), the Board says there is no requirement to deduct from rent provided the payer is satisfied about the payee's exempt status under clause (20) or (20A) of section 10 on the strength of a certificate to that effect given by the authority. The Board notes that those two clauses impose no further condition that has to be satisfied to get the exemption.
Queries had been raised whether section 194-I requires deduction where the landlord is the Government, a statutory authority under section 10(20A) or a local authority.
SECTION 194-I l RENT
1149. Whether requirement of deduction of income-tax at source under section 194-I applies in case of payment by way of rent to Government, statutory authorities referred to in section 10(20A) and local authorities whose income under the head "Income from house property" or "Income from other sources" is exempt from income-tax
1. Queries have been raised as to whether the requirement of deduction of income-tax at source under section 194-I of the Income-tax Act applies in case of payments by way of rent to the Government, statutory authorities referred to in section 10(20A) and local authorities whose income under the head ‘Income from house property’ or ‘Income from other sources’, is exempt from income-tax.
2. Under the provisions of section 196 of the Income-tax Act, no tax is required to be deducted at source from any sums payable to the Government.
3. The matter with regard to the statutory authorities and the local authorities referred to above, has been examined in the Board. Section 190 of the Income-tax Act provides for deduction of income-tax at source as one of the modes of collection of income-tax in respect of an income, notwithstanding that the regular assessment in respect of such income is to be made in a later assessment year. The income of an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, is exempt from income-tax under section 10(20A). Similarly, the income of a local authority which is chargeable under the head ‘Income from house property’ or ‘Income from other sources’, is exempt from income-tax under section 10(20). There is no other condition specified in these two clauses of section 10 which is necessary to be satisfied in order to avail of the income-tax exemption.
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.
Circular : No. 699, dated 30-1-1995.
In a section 201 demand on a tenant who did not deduct on rent paid to a development authority or municipal body.
Source: the Income Tax Department’s own published text — its page for this instrument.
