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Tax Deducted at Source
Introduction
Procedure and scheme of Tax Deduction and Collection
Various incomes liable to Tax Deduction at Source
Tax Collection at Source (Section 206 C)
Electronic Filing of TDS & TCS returns
Consequences of Failure to Deduct & pay tax
Issue of Certificate for Tax deduction
TDS Forms

TDS ON PAYMENTS FOR HOTEL ACCOMODATION

   
 

Situation 1: Whether payments made to a hotel for rooms hired during the year would be of the nature of Rent?

  • In case of Situation 1 above the Department is of the view that the payments made by persons, other than Individuals and HUFs for hotel accommodation taken on regular basis will be in the nature of rent and hence subject to TDS under section 194-I.

Situation 2: Whether earmarked rooms let out for a specified rate and specified period would be construed to be an accommodation made available on regular basis?

  • In case of Situation 2 above the Department is of the view that where earmarked rooms are let out for a specified rate and specified period, they would be construed to be accommodation made available on regular basis. Similar would be the case, where a room or set of rooms are not earmarked, but the hotel has a legal obligation to provide such types of rooms during the currency of the agreement.

Situation 3: In a situation where an Employee or an Individual representing a company (like a consultant, auditor, etc.) makes a payment for hotel accommodation directly to the hotel as and when he stays there, would attract provisions of Section 194- I?

  • In case of Situation 3 above the Department is of the view that the question of tax deduction at source would normally not arise (except where he is covered under section 44AB as mentioned above) since it is the employee or such individual who makes the payment and the company merely reimburses the expenditure.

Situation 4: It has been often observed, that there are instances, wherein Corporate employers, Tour operators and Travel agents enter into agreements with hotels with a view to merely fix lower tariffs of hotel rooms for their executives/guests/customers. Will this attract the provisions of Section 194- I?

  • In case of Situation 4 above the Department is of the view that such agreements which are usually entered into for lower tariff rates, are in the nature of Rate-contract agreements. A rate-contract, therefore, may be said to be a contract for providing specified types of hotel rooms at pre-determined rates during an agreed period. Where an agreement is merely in the nature of a rate contract, it cannot be said to be accommodation taken on regular basis, as there is no obligation on the part of the hotel to provide a room or specified set of rooms. The occupancy in such cases would be occasional or casual. In other words, a rate-contract is different for this reason from other agreements, where rooms are taken on regular basis. Consequently, the provisions of section 194-I while applying to hotel accommodation taken on regular basis would not apply to rate contract agreements.

  • Departmental clarifications as stated in Circular no. 5 (dtd. 30th July' 2002.)