The taxation dilemma around CAM charges
In India’s urban housing landscape, Common Area Maintenance (CAM) charges are a routine expense for homeowners and tenants. These charges fund the upkeep of shared facilities such as lobbies, lifts, security, landscaping, waste management, and other common amenities within residential complexes.
While everyone understands their purpose, the tax treatment of CAM charges has long been a grey area. The key question has been: Should these payments be considered part of rent and taxed accordingly, or do they qualify as separate service payments?
The Delhi High Court ruling in CIT vs. Diamond Tree (August 6, 2025) has now provided clarity. The judgment confirmed that CAM charges cannot be treated as rent under Section 194I of the Income Tax Act, 1961. Instead, they fall under Section 194C, which applies to payments for contractual services.
What are CAM charges & why are they confusing for tax purposes?
CAM charges are recurring payments collected by housing societies to maintain common areas and services. While their purpose is straightforward, their tax treatment varies across India, creating confusion for homeowners, tenants, and RWAs.
For homeowners, CAM charges are usually a regular component of society bills and rarely lead to tax complications. However, for tenants, the treatment varies significantly across cities:
- In Mumbai and Pune, CAM is generally included in rent, so there are no separate tax implications.
- In Delhi, NCR, and Hyderabad, CAM is billed separately, often raising questions about how it should be classified for TDS purposes.
- Across other cities, practices vary, with some societies including CAM in rent and others charging it separately, leading to inconsistencies in tax compliance.
The confusion arises because TDS must be deducted when rent crosses certain thresholds under Section 194I. When CAM is billed separately, it’s unclear whether it should be treated as rent or as a service payment under Section 194C. This lack of uniformity has often caused headaches for property owners, tenants, RWAs, and tax authorities alike.
Understanding the Delhi HC ruling on CAM & rent
The Delhi High Court addressed whether CAM charges should be taxed as rent (Section 194I) or as service payments (Section 194C). The bench, comprising Justice V. Kameswar Rao and Justice Vinod Kumar, ruled:
“CAM charges can be covered under provisions of 194C of the Act of 1961; the said charges cannot be construed as payment of rent for occupying the premises in question.”
What does this mean?
- Rent is the payment made for the right to occupy a property.
- CAM charges are payments for services that maintain shared facilities, such as lifts, cleaning, security, landscaping, and utilities.
This ruling establishes a clear distinction, removing ambiguity that has existed for years and providing both residents and RWAs with legal clarity on how these charges should be treated.
Why does this matter for RWAs & residents?
For residents, this distinction is important because it prevents inflated tax calculations that could occur if maintenance charges were incorrectly combined with rent. For RWAs, the ruling underscores the importance of transparent billing and accounting systems, ensuring that rent and CAM charges are clearly separated.
Expert insights:
- Raadhika Chawla, Advocate, Delhi High Court, says
“CAM charges are service payments, not rent. This ensures tax compliance is aligned correctly and prevents over-taxation by mistakenly combining rent and maintenance charges.” - Shashank Agarwal, Founder, Legum Solis, says
“Individual homeowners or HUFs are not required to deduct TDS on CAM payments. The ruling primarily affects businesses or entities obligated to deduct TDS under tax law.”
In practice:
- Homeowners and tenants should ensure rent and CAM are clearly itemized in rental agreements and invoices.
- RWAs should adopt transparent billing practices and maintain separate accounting for rent and CAM. Digital systems can make this process simpler.
- For tax authorities, the ruling provides a framework to distinguish rental income from service payments, reducing potential disputes.
Practices of CAM payments across India
While the Delhi HC ruling clarifies tax treatment, CAM practices differ across cities:
- Homeowners always pay CAM. Tenants’ responsibility depends on local practices.
- Mumbai & Pune: CAM is usually included in rent.
- Delhi, NCR & Hyderabad: CAM is typically billed separately.
- Other cities: Practices vary; some societies include CAM in rent, others charge separately.
- Taxation: CAM is considered a service payment, not rent. Large payments may require TDS under Section 194C.
By confirming that CAM is distinct from rent, the ruling provides clarity for residents, tenants, and RWAs across India.
Why this matters for India’s residential communities
Modern housing societies have evolved into complex ecosystems. RWAs now manage security, lift and corridor maintenance, waste management, landscaping, EV charging stations, and other shared facilities. With such responsibilities, transparent accounting is critical for both smooth operations and tax compliance.
The Delhi High Court ruling ensures:
- Residents are protected from unintended tax burdens.
- RWAs can maintain transparent accounts showing how funds are used.
- Tenants and homeowners can clearly see how payments are applied, minimizing disputes.
Aditya Chopra, Managing Partner, Victoriam Legalis, says
“This judgment prevents artificial inflation of rental income and protects residents from unintended tax burdens. It also reinforces the need for transparency in billing and accounting within housing societies.”
Professional management practices, like digital payment systems, now make it easier to separate rent and CAM charges, verify compliance, and build trust within communities.
Key takeaways for RWAs & residents:
- CAM charges are not rent; they cover services such as security, housekeeping, and utilities.
- TDS treatment differs: For entities liable to deduct TDS, CAM falls under Section 194C.
- No new tax burden for individuals: Homeowners and tenants are not required to deduct TDS.
- Clarity in agreements: Rent and CAM should be itemized separately in contracts and invoices.
The road ahead
While the Delhi High Court ruling may not directly affect individual taxpayers, it signals the judiciary’s intent to distinguish between different housing payments. For RWAs, it is a wake-up call to adopt transparent billing and compliance practices, ensuring taxation does not become an added friction point in apartment living.
In short, this ruling is a step toward financial clarity, fairness, and accountability in India’s residential communities, helping homeowners and tenants participate in a transparent and well-managed ecosystem.
