Section 194IC

Rent payments for properties including land, factories, buildings and machinery are subject to TDS under Sections 194I, 194IB and 194IC. Section 194IC requires TDS on rent paid under Joint Development Agreement where property owners allow development on their land.

What Is Section 194IC?

Section 194IC of Income Tax Act mandates that any payment made under joint development agreement is subject to Tax Deducted at Source or TDS. When property owner lets builder develop real estate on their land in exchange for share of property or cash, TDS must be deducted. The TDS rate is 10% and if the receiver’s PAN is not available the rate is 20%. The tax must be deducted at the time of crediting the income to the payee’s account or during actual payment whichever is earlier. There is no minimum threshold for this TDS. This section introduced in 2017 budget ensures that payments made in cash, cheque or draft to property owner by builder are taxed appropriately.

Rate Of TDS Under Section 194IC.

Under Section 194IC of the Income Tax Act, tax deduction rates are as follows:

• 10% if the rent exceeds Rs. 50,000 provided landlord's PAN details are given.
• 20% if the landlord's PAN details are not provided.
• 2% for payments towards use of machinery and equipment.

Payments must be made using a challan-cum-statement (Form 26 QC). Additionally tenants should provide Form 16C, which is TDS certificate to confirm that the tax has been deposited. Importantly TAN or Tax Deduction Account Number is not required for making these payments.

When To Deduct TDS Under Section 1941C?

If you are paying resident contractor or subcontractor you are responsible for deducting TDS. This should happen either when you credit payment to their account or when you actually make payment whether in cash, by cheque or any other method. Even if you transfer amount to suspense account in your books, it is still considered as if you have credited it to contractor/subcontractor. In simpler terms TDS must be deducted when payment is recorded in your books or when it is actually made, regardless of whether it is directly to payee or to suspense account.

Time Limit For Depositing Under Section 194IC.

When it comes to TDS or Tax Deducted at Source payments, rules vary depending on who is paying the bill. If it is government the deadline is same day as the payment and no challan form is needed. 
But for non-government payments you have got bit more time like seven days after the month ends in which deduction took place. However there is special case for March payments it should be sorted out before April 30th rolls around. So basically government transactions require quick action while others give you week's grace period after the month concludes except for March payments, which need to be squared away before April ends.

What Are The Penalties For Late Or Delayed Filing.

When Is Tax Non-Deductible Under Section 194IC?

Under Section 194IC certain circumstances make taxes non-deductible. 

• Firstly no tax deduction is required if amount paid or payable doesn't exceed Rs. 2,40,000 in financial year. 
• Secondly if an individual or Hindu Undivided Family or HUF is tenant and not engaged in business, tax deduction isn't needed. 
• Thirdly payments to government or local/statutory authorities are exempt from tax, so no tax deduction applies. 

Lastly in film distribution, if lease isn't structured as a rental, it falls outside the scope of this section, meaning no tax deduction is mandated. These conditions help simplify when taxes are not deductible under Section 194IC making it easier to understand for individuals and entities involved.

Conclusion

Section 194IC of the Income Tax Act mandates TDS on payments made under Joint Development Agreements. The TDS rates are 10% or 20% depending on PAN availability with no minimum threshold. Payments exceeding Rs. 50,000 are subject to TDS. Non-deductible circumstances include payments below Rs. 2,40,000 individuals/HUFs not in business, payments to government/local authorities and certain film distribution scenarios.