Service tax is not to be included for computing the TDS on rental income – CBDT clarifies
CBDT has received representations seeking clarification whether the Service Tax element has to be included for computing the TDS in case of rental income. The Board has clarified that service tax paid by the tenant doesn't partake the nature of "income" of the landlord. The landlord only acts as a collecting agency for Government for collection of Service Tax. Tax deduction at source ( TDS ) under sections 194-I of Income Tax Act would be required to be made on the amount of rent paid/payable without including the service tax.
CBDT Circular No 4/ 2008 , Dated: April 28, 2008