TDS on flats alloted by Builders, Income Tax

[hubert fernandes]

I am a plot owner and have given my plot on JDA to Builder for Development. As consideration for my plot The Builder has alloted 20 flats to me in the said project. Am i required to deduct TDS u/s 194IA ?

Posts / Replies

[YAGAY andSUN]

In your case — as a plot owner entering into a Joint Development Agreement (JDA) and receiving 20 flats as consideration — the question of TDS applicability under Section 194-IA of the Income-tax Act, 1961 requires careful legal interpretation based on the structure of the transaction.

✅ Section 194-IA – Applicability Overview

Section 194-IA imposes an obligation to deduct TDS at 1% on the consideration for the transfer of immovable property (other than agricultural land), if:

• The transfer of property involves consideration exceeding ₹50 lakhs, and

• The buyer (transferee) is responsible for making the payment.

It applies when:

• There is a monetary consideration, and

• There is a sale or transfer of property as per Section 2(47) of the Income-tax Act.

🔍 Your Case: Joint Development Agreement (JDA)

✅ Key Facts:

• You are not receiving monetary consideration.

• Instead, you are receiving constructed flats (non-monetary consideration).

• The Builder is constructing and allotting flats to you in lieu of land rights.

📘 Legal Analysis

⚖️ 1. Section 194-IA – Not Applicable to Non-Monetary Consideration

• Section 194-IA is triggered only where there is a monetary payment.

• In your case, since the consideration is in the form of barter (i.e., flats against land), there is no "payment" in monetary terms being made by either party that can be subjected to TDS under Section 194-IA.

🔹 CBDT Clarification & Judicial Precedent:

• The CBDT has not issued any circular expanding the scope of Section 194-IA to cover non-monetary consideration.

• In various rulings, courts have noted that Section 194-IA does not apply where no monetary payment is made.

⚖️ 2. Section 194-IC May Apply — For Developer

• If any monetary consideration is also paid to you in addition to flats, then Section 194-IC may apply to the Builder, requiring TDS @10% on monetary payments made to the landowner under a Joint Development Agreement.

📌 Conclusion

✅ You are not required to deduct TDS under Section 194-IA, as you are not making any monetary payment to the Builder.

❌ Section 194-IA only applies to monetary consideration for transfer of immovable property, not for barter/exchange of development rights for flats.

🔔 However, if you receive any cash consideration, TDS may be applicable under Section 194-IC, but that responsibility lies with the Builder, not you.

Disclaimer: This discussion is not a Legal Opinion. Discuss it with your CA before taking any action on it.

[Ramanathan Seshan]

Dear Yagay-sir,

Will the transaction not attract 194R ? 

Regards,

S ram