Recent amendment to Income Tax Act as proposed in budget-2007 has sought to change the definition of rent. Hitherto, rental would not mean only the rent for letting out the buildings alone.

Under the exiting provisions contained in section 194-I, tax is required to be deducted at source on payment of rent. The term “Rent” has been defined in the Explanation to the said section to, inter alia, mean payment for use of any building (including factory building) together with furniture, fitting and the land appurtenant thereto whether or not such building is owned by the payee.

In a judgment that could have far reaching implications, the Authority for Advance Rulings (AAR) has held that income received by a foreign company in providing access to its server located outside India would be taxable in India.