April 02, 2026
7 mins read
Section 194IC of the Income Tax Act mandates that developers deduct tax at source on monetary consideration paid to resident landowners under Joint Development Agreements (JDAs). The standard TDS rate is 10%. If the landowner fails to provide a PAN, the rate rises to 20%. TDS must be deducted at the time of payment or credit, whichever is earlier.
A Joint Development Agreement (JDA) allows a landowner to grant development rights to a builder in exchange for monetary consideration or a share of the developed property. To ensure tax compliance, Section 194IC requires the developer to deduct TDS on payments made to resident landowners. The deduction is 10% if the recipient furnishes a PAN; otherwise, it is 20%. TDS applies to all monetary payments without a threshold, and it must be deducted when the amount is credited or paid, whichever happens first.
Additional Read: What is Section 194IB
Section 194IC applies to payments made under a JDA when the developer gives monetary consideration to a resident landowner. The payer must deduct TDS at 10% if the landowner provides a valid PAN; if not, the rate is 20%. This provision ensures tax is collected at source and applies regardless of the payment amount.
Standard rate: 10% TDS on monetary consideration when the landowner provides a PAN.
Higher rate without PAN: 20% TDS applies if the recipient does not furnish a PAN.
No threshold: TDS applies from the first rupee of payment.
Deduction timing: Tax must be deducted at the time of credit or payment, whichever occurs first.
Timing: TDS is deducted when the payment is credited to the landowner or when it is actually paid.
Deposit deadline: After deduction, TDS must be deposited with the government by the 7th of the following month.
Payment mode: TDS is usually deposited electronically through authorised banks or the income‑tax portal.
Penalties: Late deduction or deposit attracts interest and penalties under the Income Tax Act.
No minimum threshold: TDS applies to any monetary payment under a JDA.
Applicable on all payments: Developers must deduct tax on every monetary payment made to the landowner.
Responsibility: The payer is responsible for deducting TDS before making the payment.
Interest for non‑deduction: If TDS isn’t deducted on time, interest accrues until it is deducted.
Interest for late deposit: When TDS is deducted but not deposited promptly, interest accrues from deduction date until payment.
Late filing fee: Filing TDS returns after the due date incurs a daily fee under Section 234E.
Additional penalties: Failure to file the TDS statement may attract penalties under Section 271H.
Additional Read: What is Section 194O of the Income Tax Act?
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Section 194I applies to rent paid by businesses, 194IA to property purchases above ₹50 lakh, and 194IB to rent paid by individuals or HUFs over ₹50,000 per month.
Section 194C covers TDS on payments made to contractors or subcontractors when a single payment exceeds ₹30,000 or the annual total exceeds ₹1,00,000.
Section 194IC was introduced through the Finance Act, 2017, to cover monetary consideration paid under development agreements between landowners and real estate developers.
Section 194IA mandates 1% TDS on the sale of immovable property above ₹50 lakh. It applies to buyers and must be deducted before making any payment to the seller.
Under 194IB, individuals or HUFs paying monthly rent above ₹50,000 must deduct 5% TDS and deposit it using the government’s online tax payment system.
Yes, PAN is required. Without PAN, TDS under Section 194IA must be deducted at 20% as per Section 206AA of the Income Tax Act.
TDS under Section 194C applies when a single payment exceeds ₹30,000 or total annual payments exceed ₹1,00,000 to contractors or subcontractors.
Section 194IC deals with tax deducted at source on certain payments linked to property development deals. It applies when a landowner receives compensation for giving development rights or additional floor space to a developer under an agreement.
The responsibility to deduct tax under Section 194IC lies with the person making the payment. In most cases, this is the developer or builder who pays compensation to the landowner as part of a joint development arrangement.
Under this section, tax is deducted at a rate of ten percent on the amount paid as consideration. The deduction is made when the payment is credited or actually paid, depending on which happens first.
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