• In Chennai if a home is let out for PG / coliving do we need to change to commercial property tax

I have been letting my property for PG in chennai.Now under hostel license they r asking us to change to commercial EB and property tax to commercial.

Since occupants stay is minimum 3 months it is not like daily lodging.

1.Is there any law that I should mandatorily change to commercial.?

2.Can I rent my home to a company for them to carry on PG as a business.?In that case is TDS for rent is it mandatory?

3.I collect rent around 1lakh to 6 lakh monthly as a aggregate from my occupants will GST be applicable.since companies like zolo,colive they dont collect GST from occupants,should I collect GST?

Now the coliving concept is again new and all these GST and commercial property tax should be paid as a house owner when I run it as a PG? 

I need legal advice for this.I am also planning to scale this business as a registered company in future ,before that I need clarity on this ax and GST for PG or co living business.

Thank you
Asked 3 years ago in Taxation

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5 Answers

While you are converting your house into a PG, you are altering the accommodation from residential to commercial.

As you will be drawing the income instead of renting the services, it will be treated as a commercial property that requires compliance of certain legal formalities and norms.

Conversion of the property from residential to commercial not only alters its profile but also impacts your monthly bills and expenses.

While letting out the property to multiple guests will improve your earnings, your liabilities will also increase as now all the facilities such as electricity, gas, and water would be chargeable at a commercial rate.

Besides, the property tax levied would also be according to a commercial property rather than residential property.

The TDS for rental amount is essential.

You may have to see if your annual turnover or income is coming within the GST limits, then it would be pertinent to charge GST accordingly.

 first thing first, if you convert your house into a PG, it will be treated as a commercial property and the owners will have to pay all the bills including electricity, water and taxes at commercial rates

 

T Kalaiselvan
Advocate, Vellore
84712 Answers
2172 Consultations

5.0 on 5.0

1) While you are converting your house into a PG, you are altering the accommodation from residential to commercial. As you will be drawing the income instead of renting the services, it will be treated as a commercial property

 

2) you can rent your house to company 

 

3) TDS has to be deducted 

 

4) GST has to be paid 

Ajay Sethi
Advocate, Mumbai
94522 Answers
7485 Consultations

5.0 on 5.0

1. if the primary user of your property is residential i.e. for your own use, then no need to change to commercial

2. the company will be paying you rent. So the company has to deduct TDS if the rent is above the statutory threshold

3. prima facie it seems that GST is applicable

 

Yusuf Rampurawala
Advocate, Mumbai
7485 Answers
79 Consultations

5.0 on 5.0

Dear Sir/Madam,

1. Individual houses, flats and apartments that have not been rented out for commercial/ business purposes, are treated as residential for tax purposes. While you are converting your house into a PG, you are altering the accommodation from residential to commercial. As you will be drawing the income instead of renting the services, it will be treated as a commercial property that requires compliance of certain legal formalities and norms.

2. In that case, TDS shall not be made mandatory (i.e., to be payable by you), but the company must pay taxes for the commercial establishment.

3. Primarily GST is applicable only on commercial transactions and any supplies made by a person in his personal capacity would not constitute a supply and consequently would not be chargeable to GSTPG services are covered under renting of immovable property hence it will qualify as supply of service.

Thank you

 

Anik Miu
Advocate, Bangalore
8742 Answers
109 Consultations

4.7 on 5.0

- If you are converting your house into a PG , then the house will be treated as a commercial property 

- Hence, it needs approvals from municipal authorities for such conversions ,and you are liable to pay the bills and the taxes, applicable at commercial rates.

1. THE REGULATION OF PRIVATE HOSTELS AND PAYING GUEST ACCOMMODATION CENTRES BILL, 2017 , and it applied to whole India. 

2. Yes , if you have crossed the GST income limit , 

3. Yes

- You can engage a local lawyer for the same. 

Mohammed Shahzad
Advocate, Delhi
13105 Answers
195 Consultations

5.0 on 5.0

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