Latest Blogs from SBS and Company LLP

    Specified Agreement -TDS Aspect

    Finance Act 2017 has introduced Section 45(5A) providing that income arising to individual or HUF from transfer of capital asset, being land or building or both under a specified agreement is chargeable to tax in the previous year in which certificate of completion for the whole or part of the project is issued by the competent authority.

     

    "Specified Agreement" refers registered agreement under which the owner of the land or building or both agrees to allow other person to construct property on it in consideration for share in the building or land or both in the project with or without payment of consideration in cash.- In common parlance referred to as " Joint Development Agreement" ( Simplified for understanding) .

     

    A new section194IC inserted providing for deduction of tax at source @ 10% on payment of any sum byway of monetary consideration under the agreement referred to in section 45(5A). The provisions of section 206AA will apply for failure on part of the payee to submit his PAN to the payer.

     

    The section 194IC is attracted to when the payment is made to resident under the agreement referred to in section 45(5A) by any person, resident or non-resident. There is no monetary limit set under the section for deduction of tax at source.

     

    The monetary limit mentioned in section 194IA is not applicable as the section194IC starts with ' notwithstanding anything contained in section 194IA'.

     

    If the payee is non-resident, tax has to be deducted U/S 195 and not U/S 194IC.

     

    The timing of deduction of tax at source would be earliest of credit of such sum to the account of the payee or payment thereof in cash1 or by way of issue of a cheque or draft or any other mode.

     

    Though the tax is deducted at the earliest of credit or payment under the agreement the income is chargeable to tax in the year in which certificate of completion for the whole or part of the project is issued by the competent authority. As a result the deductee has to carry forward the credit of tax to the previous year in which capital gain become taxable.

     

    As per section 199 read with rule 37BA(3)(I) credit for the tax deducted at source and paid to the Central Government shall be given for the assessment year for which such income is assessable.

     

     

     

     

     

     

     

     

     

     

    1Beware of provisions of section 269SS.

     

     

     

    16  | P a g e


     

    SBS Wiki                                                                                                                                                       www.sbsandco.com/wiki

     

    For the purpose of section 194IC the provisions of section 50C are not relevant as the section provides for deduction of tax at source on the monetary consideration paid under the specified agreement. The stamp duty value on the date issue of certificate of completion for whole or part of the project is relevant for computation of capital gains in the hands of land owner.

     

    Section 197 provides issue of certificate for deduction of tax at lower rate or non-deduction of tax by the Assessing Officer. However, section 197 has not provided for such benefit for the amount covered U/S 194IC.

    Subscribe SBS AND COMPANY LLP updates via Email!