TDS on lump sum lease premium paid for acquisition of long term lease - CBDT Clarifies
SECTION 194-I of the Income-tax Act, 1961 (the Act) requires that tax be deducted at source at the prescribed rates from payment of any income by way of rent. For the purposes of this section, "rent" has been defined as any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or machinery or plant or equipment or furniture or fittings.
The issue of whether or not TDS under section 194-I of the Act is applicable on 'lump sum lease premium' or "one-time upfront lease charges" paid by an assessee for acquiring long-term leasehold rights for land or any other property has been examined by CBDT in view of representations received in this regard.
CBDT clarifies that lump sum lease premium or one-time upfront lease charges, which are not adjustable against periodic rent, paid or payable for acquisition of long-term leasehold rights over land or any other property are not payments in the nature of rent within the meaning of section 194-I of the Act. Therefore, such payments are not liable for TDS under section 194-I of the Act.
CBDT Circular No. 35/2016, Dated: October 13, 2016