Introduction
Section 194IC of the Income Tax Act, of 1961 talks about the deduction of tax from payments under the Joint Development Agreement.
What is Section 194IC of the Income Tax Act, 1961?
Any person who pays to a Resident any amount by way of consideration (but not consideration in kind) under a Joint Development Agreement (JDA) is required to deduct TDS (Tax Deducted at Source) in accordance with Section 194IC of the Income Tax Act, 1961. Additionally, the JDA is a contract that permits one property owner to grant another permission to develop real estate on their land or building.
Example of Section 194IC:
A person might, for instance, possess a plot of land or a building (or both). This person may offer the assets to a builder, who would subsequently develop the land with a house or other structure. The builder will also sell the structure that was constructed on the leased land. Now he may provide the landowner with some apartments in addition to giving him cash. Therefore, a builder is required to deduct the TDS from any payments made to an individual in cash, cheque, or draft.
What is the Joint Development Agreement under section 194IC?
The joint development agreement is a legally binding contract between a promoter and a landowner that outlines the new projects that will be built there. The promoter completes the legal building work based on this agreement. Additionally, the owner will give the land, and this agreement states that the owner will be compensated in cash or in the form of property shares.
Time of deducting TDS on Joint Development Agreement under Section 194IC of the Income Tax Act, 1961
TDS is required to be deducted in case of payment made to the when-
- Such sum is credited of such sum to the account of the payee; or
- Payment is made to the payee in cash or by way of issue of cheque/ draft/ any other mode
whichever event takes place earlier.
Rate of Deduction of Tax rate Section 194IC
The rate of tax deduction under Section 194IC of the Income Tax Act, 1961 are listed below:
- 10% -if the PAN is available to the recipient.
- 20% if the PAN information of the recipient is not available
Note: Additionally, there is no threshold limit prescribed under Section 194IC of the Income Tax Act, 1961.
Furnishing of Certificate under Section 203 of the Income Tax Act, 1961
In order to demonstrate that the resident has deposited TDS, he must also furnish Form 16C. Form 16C is a TDS certificate that is to be submitted.
Do you need help with the preparation of a TDS Certificate under Section 203 of the Income Tax Act, 1961? Contact us today.
Conclusion
Section 194IC of the Income Tax Act, 1961 talks about the deduction of TDS at the rate of 10% for the payment made to a Resident under the Joint Development Agreement.
