Section 194-IC of ITA, 1961 : Section 194-Ic: Payment Under Specified Agreement

Explanation using Example

Imagine Priya and Raj enter into a joint development agreement for the construction of a building on Priya's land. According to the agreement, Raj, a builder, is supposed to pay Priya, the landowner, an amount of ₹50 lakhs as her share of the consideration for the development rights. As per Section 194-IC of the Income-tax Act, 1961, Raj is required to deduct an amount equal to ten per cent of the ₹50 lakhs, which is ₹5 lakhs, as income tax at the time he credits the amount to Priya's account or at the time of payment, whichever occurs first. This deducted amount should be deposited with the government as Tax Deducted at Source (TDS) on behalf of Priya.