Section 194-IC of the Income Tax Act, 1961, mandates Tax Deducted at Source (TDS) on monetary payments made under Joint Development Agreements (JDAs) referred to in Section 45(5A). This provision ensures tax compliance on transactions where landowners collaborate with developers for real estate projects.
- Applicability of Section 194-IC
✅ Covered Transactions:
-
- Payments under registered JDAswhere landowners transfer land/building (capital assets) to developers in exchange for:
- Cash/cheque/draft(monetary consideration).
- Share in the developed property(e.g., flats) + cash .
- Applies only if the landowner is a resident individual/HUF.
- Payments under registered JDAswhere landowners transfer land/building (capital assets) to developers in exchange for:
❌ Exemptions:
-
- Non-resident landowners(covered under Section 195).
- Pure in-kind transactions(no cash/cheque component) .
- Unregistered JDAs(Section 45(5A) inapplicable) .
- TDS Rate & Deduction Rules
| PARAMETER | DETAILS |
| Rate (PAN Provided) | 10% of monetary consideration . |
| Rate (PAN Not Provided) | 20% (under Section 206AA) . |
| Threshold | No minimum limit (applies to all qualifying payments) . |
| Timing | Deduct at the earlier of: |
- Credit to landowner’s account.
- Actual payment (cash/cheque/draft) .
Example:
- JDA Payment: ₹50 lakh (cash) to landowner.
- TDS (10%): ₹5 lakh → Net Payment: ₹45 lakh.
3. Key Conditions for TDS Deduction
- Registered JDA: Agreement must be registered .
- Capital Asset: Land/building must be held as a capital asset(not stock-in-trade) .
- Resident Payee: Landowner must be a resident individual/HUF.
- Monetary Component: Payment must include cash/cheque (not just property share) .
4. Compliance Requirements
- Deposit TDS: By the 7th of the next month(March: April 30) via Challan 281 .
- TDS Return: File Form 26Qquarterly .
- Certificate: Issue Form 16Ato the landowner .
5. Tax Treatment Under Section 45(5A)
- Landowner’s Liability: Capital gains taxed in the year the Completion Certificate (CC)is issued, based on:
- Stamp duty valueof the property share + cash received .
- Developer’s Liability: TDS under Section 194-IC is adjusted against the landowner’s final tax liability.
6. Penalties for Non-Compliance
- Late Deduction: Interest @ 1% per month.
- Late Payment: Interest @ 5% per month.
- Non-Filing: Penalty up to ₹1 lakh.
Key Takeaways
🔹 10% TDS on cash/cheque payments under registered JDAs.
🔹 No TDS if payment is purely in-kind (e.g., only property share).
🔹 PAN Mandatory to avoid 20% deduction.
🔹 Landowner’s tax liability arises only at CC issuance
