FRX Ltd. gives a multilevel parking building in front of a shopping mall in Delhi to ABC Ltd. on a lease of 80 year. ABC Ltd. is liable to pay ₹3 Crore as one-time lease premium in addition to an annual lease rent of ₹26

FRX Ltd., the Company granting lease of parking lot, is required to collect tax at source @ 2% (1.5% from 14.05.2020 to 31.03.2021) under section 206C from the one-time lease premium of ₹3 Crore and annual lease rent of ₹26 Lakh, i.e. on ₹3.26 Crore at the time of debiting the amount payable by ABC Ltd. (assume to be resident in India) or at the time of receipt of such amount, whichever is earlier. In case ABC Ltd. does not have PAN, tax has to be collected by FRX Ltd. at the rate of 5% being the higher of- 5% and 4% i.e. twice the TCS rate of 2% In the hands of ABC Ltd., TDS provisions u/s 194I would not be attracted on the one-time lease premium of ₹3 Crore paid for acquisition of long-term leasehold rights over land or building, which are not adjustable against periodic payments. [CBDT Circular No.35/2016 dated 13.10.2016]. But TDS provisions will apply on annual lease rent u/s 194I @ 10%.