The clarification comes in the wake of CBDT getting many representations from industry and field formations seeking to know if TDS provisions under Section 194-I of the Income Tax Act were applicable on the gross rental amount payable (inclusive of service tax) or net rental amount payable (exclusive of service tax).

"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. Therefore, it has been decided that tax deduction at source (TDS) under Section 194-I of Income Tax Act would be required to be made on the amount of rent paid/payable without including the service tax," the circular said.