TDS Provision applicability and 26AS
Mr. Ram is an owner of the property.
Fraud Private limited enter into an Rent agreement with Ram on 10.04.2012
1. Rental Advance Rs. 10,00,000 shall be paid on 10.04.2012
2. Three Years Rent Rs. 10,80,000 (30,000 per month) shall be paid before 30.04.2012
3. Service Tax not Applicable for Ram.
Section 194I Rent paid Rs. 10,80,000
TDS Applicable and deducted at 10%, (TDS shall be deducted for amount paid/credited whichever is applicable)
Fraud Private Limited Accounted as
Rent a/c Dr. Rs. 3,60,000
Prepaid Rent Expenditure a/c Dr. 7,20,000
Rental Advance Dr. Rs. 10,00,000
To TDS Rs. 1,08000
To Ram a/c. 19,72,000
and Remmited TDS before 07.05.2012
Mr Ram accounted( as you Know)
He offered Rental income of Rs. 3,60,000
26AS shows Rent (94I) Rs. 10,80,000
and TDS deposited Rs. 1,08,000
Plz solve the problem of Ram How he should file the Income Tax Return.
As per my knowledge, Mr Ram should show rental income of Rs 3,60,000/- only, and should claim TDS refund.
When he get the Income Tax demand, he should send Rent agreemnt to IT officer, telling that rent of Rs 10,80,000/- shown in 26AS, is for three years.
Here the HP(House Property) income is taxable on the basis of ALV (Annual Letting Value . (IT act 1961 is silent abt advance rent). Hence ALU may be (30000*12) hence TDS Credit to be availed to that extent & balance has to be adjusted aganist the future rent. Even the IT dept circular says the same.
Based on that we can recognise the rental income in coming years & avail the tax credit. And to be in saferside communicate the same to the IT dept to avoid scrutiny because of the mismatch of the income as per 26AS & income as per returns filed u/s 139.