What is Section 194IC of Income Tax?
The Government of India introduced Section 194IC joint development agreement of real estate under the scope of TDS. Further, the ministry of finance introduced this section during the 2017 budget.
What is Joint Development Agreement under Section 194IC?
A joint development agreement is a registered contract between a property owner and a promoter to construct new projects on the land owner’s property. According to this agreement, the promoter carries out legal construction work. Further, the owner provides the land. Additionally, under this agreement, an owner is paid back in cash or shares in the property.
Read Also : TDS on Rent
What TDS Rate is Applicable under Section 194IC?
Below are the rates of tax deduction under Section 194IC of the Income Tax Act:
10% if the rent amount is over Rs. 50,000. Further, the landlord’s PAN details also need to be provided
20% if the landlord’s PAN details are not provided
2% When the use of machinery and equipment is there.
What is the Payment Mode under Section 194IC of Income Tax?
The payment mode under Section 194IC is a challan-cum-statement, Form 26 QC. In addition, the tenant should provide Form 16C to prove that tenant has deposited tax. Moreover, Form 16C is a TDS certificate. However, a TAN (Tax deduction account number) is not required to make payments.
When to Deduct Taxes under Section 194IC?
Tenants, or the real estate builder, need to deduct and pay taxes to the Government once during a financial year.
What is the Time Limit for Depositing under Section194IC?
If the Government or somebody on its behalf makes the payment, then the time limit is the same day. Moreover, one does need to use any challan form.
However, if the payment is not made on behalf of the Government, the TDS is to be deposited within 7 days past the month-end, where a deduction takes place.
Further, if this amount payment is made in March, the TDS must be deposited prior to April 30.
Read Also : TDS deduction on the payment of commission or brokerage
What are the Penalties for Non-Payment of Taxes under Section 194IC?
Individuals will have to pay penalties under the following circumstances:
The income tax department can deduct an amount that is equal to the tax deducted if there is an instance of non-deduction of charges.
If a tax deposit to the Government is delayed, it will charge a penal interest of 1% if the deduction of taxes gets delayed. However, Government will charge 1.5% if the depositing tax is delayed.
In a situation where the individual fails to submit Form 26QC in a span of 30 days from month end, taxes were paid. Moreover, each day will be levied with a late fee of Rs. 200.
When is Tax Non-Deductible under Section 194IC?
Circumstances, when taxes are non-deductible under Section 194IC, are:
If the amount paid/payable does not exceed Rs. 2,40,000 in a given financial year.
In case an individual or HUF is the tenant and is not carrying out business.
A person paying to Government does not require deducting TDS. The payments made to local and statutory authorities are exempted from tax, thus, tax cannot be deducted.
In the case of film distribution, the lease is not in the form of a rental. Hence, it does not fall under this section
