TaxTMI 
TaxTMI 
Evolution of TDS Provisions for Real Estate Development Agreements : Clause 393(1)[Table: S.No. 3(ii)] of the Income Tax Bill, 2025 Vs. Section 194IC of the Income-tax Act, 1961
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....ified agreements, particularly those falling within the ambit of Joint Development Agreements (JDAs) as defined u/s 45(5A). The evolution of these provisions reflects the legislative intent to bring greater transparency and compliance in real estate transactions, especially those involving complex arrangements between landowners and developers. This commentary provides a comprehensive analysis of Clause 393(1)[Table: S.No. 3(ii)] of the Income Tax Bill, 2025, examining its structure, objectives, and practical implications. The analysis is then extended to a comparative study with Section 194IC of the Income-tax Act, 1961, highlighting similarities, differences, and the underlying policy rationale. The discussion is structured to address the....
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....here was significant ambiguity regarding the timing and mechanism of TDS on payments made under JDAs. The absence of a specific TDS provision led to practical difficulties, as existing sections (such as 194-IA, dealing with transfer of immovable property) did not adequately cover the nuances of JDAs, where consideration could be partly in kind. Section 194IC was thus a targeted response to a growing segment of real estate transactions, and Clause 393(1)[Table: S.No. 3(ii)] represents its continuation in the proposed new tax code. Detailed Analysis of Clause 393(1)[Table: S.No. 3(ii)] of the Income Tax Bill, 2025 Text of the Provisions Clause 393(1)[Table: S.No. 3(ii)] - Income Tax Bill, 2025: * Nature of Income or Sum: Any conside....
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....hreshold Limit: * No threshold is specified. TDS applies irrespective of the quantum of consideration, ensuring comprehensive coverage and reducing the risk of tax leakage through splitting of payments. * Timing of Deduction: * TDS is to be deducted at the earlier of credit or payment, aligning with the general principle of TDS provisions and ensuring that tax is collected at the earliest point of accrual or disbursement. * Interaction with Other Provisions: * The note to the Table clarifies that if both S.No. 3(i) (general TDS on property transfer) and 3(ii) (TDS on consideration under specified agreement) apply, deduction is to be made only under 3(ii). This prevents double deduction and provides clarity on precedence. Interpre....
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....* In hybrid consideration arrangements, developers must segregate monetary and in-kind components, ensuring TDS is deducted only on the former. * Tax Authorities: * The provision enhances traceability of transactions and aids in tax administration. The absence of a threshold reduces the risk of tax evasion through splitting or structuring of payments. Compliance and Procedural Aspects * Deposit and Reporting: * Developers must deposit TDS with the government within the prescribed timelines and file TDS returns, furnishing details of the payee and the amount deducted. * Failure to deduct or deposit TDS may result in disallowance of expenditure u/s 40(a)(ia) (or its equivalent in the new Code) and levy of interest and penalties. ....
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....Table: S.No. 3(ii)] refers to section 67(14) of the new Bill. The substance is the same, but the cross-reference reflects the new legislative framework. * Clarity on Precedence: * The new Bill explicitly notes that if both S.No. 3(i) and 3(ii) apply, TDS is to be deducted only under 3(ii). While Section 194IC achieves the same through a "notwithstanding" clause, the new format is arguably clearer and more accessible for taxpayers. * Terminology and Structure: * The tabular presentation in the new Bill enhances clarity, specifying payer, payee, rate, and threshold in a structured format. This is an improvement over the more narrative style of the 1961 Act. * Integration with Other Provisions: * The new Bill integrates TDS provisi....