I am the developer under a joint development agreement with an individual landowner. I am giving him constructed area plus some cash. What do I have to deduct, on what, and do I need a TAN?
You deduct ten per cent, but only on the monetary consideration. Section 194-IC applies notwithstanding section 194-IA to any person responsible for paying a resident any sum by way of consideration, 'not being consideration in kind', under the agreement referred to in section 45(5A), at the time of credit to the payee's account or at the time of payment, whichever is earlier — and unlike sections 194-IA, 194-IB and 194M it contains no provision disapplying section 203A, so the deductor needs a TAN and files an ordinary quarterly return.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2017-04-01, reported as Section 194-IC of the Income-tax Act, 1961, as amended up to 2026. It bears on section 194-IC, section 194-IA, section 45(5A), section 203A of the Income Tax Act 1961, in TDS Defaults, Capital Gains and House Property matters.
Three features of this short section decide most of the disputes. First, there is no threshold whatever. Sections 194-IA, 194-IB and 194M each carry a monetary floor; section 194-IC does not, so a single rupee of cash consideration under a specified agreement attracts deduction. Second, the exclusion of consideration in kind means the constructed area — usually the bulk of what the landowner receives — is outside the section entirely, and a developer who deducts on the value of the built-up share is deducting on something the section does not reach. Third, and this is the trap that produces section 201 demands against developers who thought they were in the same regime as a flat buyer, section 194-IC does NOT disapply section 203A. The cross-reference note carried on this section points to Forms 16A, 24G, 26B, 26Q and 27A — the ordinary TDS return and certificate — and not to any challan-cum-statement, whereas the corresponding notes for sections 194-IA, 194-IB and 194M point respectively to Forms 26QB and 16B, 26QC and 16C, and 26QD and 16D. A developer who pays cash under a joint development agreement without a TAN is exposed on section 203A as well as on the deduction. The opening words also matter: 'Notwithstanding anything contained in section 194-IA' resolves the overlap in favour of this section where a specified agreement is in play, so the one per cent charge does not apply to the same payment.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 194-IC reads in full: 'Notwithstanding anything contained in section 194-IA, any person responsible for paying to a resident any sum by way of consideration, not being consideration in kind, under the agreement referred to in sub-section (5A) of section 45, shall at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon.' The section has no sub-sections, no proviso, no Explanation, and no monetary threshold; it contains no provision disapplying section 203A.
Deduction under section 194-IC is at ten per cent of the monetary consideration paid or credited under an agreement referred to in section 45(5A), whichever is earlier; consideration in kind is expressly excluded; there is no threshold; and the section applies notwithstanding section 194-IA, so the one per cent charge under that section does not apply to the same payment. Because the section does not disapply section 203A, a deductor under it requires a tax deduction account number and reports in the ordinary way.
Not applicable — this is a statement of statutory text, together with an inference drawn from the presence in sections 194-IA, 194-IB and 194M, and the absence in this section, of a provision disapplying section 203A. No judicial reasoning is involved.
Notwithstanding anything contained in section 194-IA, any person responsible for paying to a resident any sum by way of consideration, not being consideration in kind, under the agreement referred to in sub-section (5A) of section 45, shall at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon.
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Handle my notice → Ask a CA on WhatsAppYou deduct ten per cent, but only on the monetary consideration. Section 194-IC applies notwithstanding section 194-IA to any person responsible for paying a resident any sum by way of consideration, 'not being consideration in kind', under the agreement referred to in section 45(5A), at the time of credit to the payee's account or at the time of payment, whichever is earlier — and unlike sections 194-IA, 194-IB and 194M it contains no provision disapplying section 203A, so the deductor needs a TAN and files an ordinary quarterly return. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 194-IC, section 194-IA, section 45(5A), section 203A of the Income Tax Act 1961. It is reported as Section 194-IC of the Income-tax Act, 1961, as amended up to 2026. Three features of this short section decide most of the disputes. First, there is no threshold whatever. Sections 194-IA, 194-IB and 194M each carry a monetary floor; section 194-IC does not, so a single rupee of cash consideration under a specified agreement attracts deduction. Second, the exclusion of consideration in kind means the constructed area — usually the bulk of what the landowner receives — is outside the section entirely, and a developer who deducts on the value of the built-up share is deducting on something the section does not reach. Third, and this is the trap that produces section 201 demands against developers who thought they were in the same regime as a flat buyer, section 194-IC does NOT disapply section 203A. The cross-reference note carried on this section points to Forms 16A, 24G, 26B, 26Q and 27A — the ordinary TDS return and certificate — and not to any challan-cum-statement, whereas the corresponding notes for sections 194-IA, 194-IB and 194M point respectively to Forms 26QB and 16B, 26QC and 16C, and 26QD and 16D. A developer who pays cash under a joint development agreement without a TAN is exposed on section 203A as well as on the deduction. The opening words also matter: 'Notwithstanding anything contained in section 194-IA' resolves the overlap in favour of this section where a specified agreement is in play, so the one per cent charge does not apply to the same payment. If it applies to you, the first step is this: Obtain or verify a TAN before the first payment. Section 194-IC does not disapply section 203A, so the section 194-IA practice of paying through a challan-cum-statement without a TAN is wrong here.
Section 194-IC reads in full: 'Notwithstanding anything contained in section 194-IA, any person responsible for paying to a resident any sum by way of consideration, not being consideration in kind, under the agreement referred to in sub-section (5A) of section 45, shall at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon.' The section has no sub-sections, no proviso, no Explanation, and no monetary threshold; it contains no provision disapplying section 203A. The matter was decided on 2017-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Deduction under section 194-IC is at ten per cent of the monetary consideration paid or credited under an agreement referred to in section 45(5A), whichever is earlier; consideration in kind is expressly excluded; there is no threshold; and the section applies notwithstanding section 194-IA, so the one per cent charge under that section does not apply to the same payment. Because the section does not disapply section 203A, a deductor under it requires a tax deduction account number and reports in the ordinary way.
Not applicable — this is a statement of statutory text, together with an inference drawn from the presence in sections 194-IA, 194-IB and 194M, and the absence in this section, of a provision disapplying section 203A. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "Notwithstanding anything contained in section 194-IA, any person responsible for paying to a resident any sum by way of consideration, not being consideration in kind, under the agreement referred to in sub-section (5A) of section 45, shall at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon."
It was decided by the CBDT Circulars & Instructions on 2017-04-01 and is reported as Section 194-IC of the Income-tax Act, 1961, as amended up to 2026. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 194-IC, section 194-IA, section 45(5A), section 203A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Deduction under section 194-IC is at ten per cent of the monetary consideration paid or credited under an agreement referred to in section 45(5A), whichever is earlier; consideration in kind is expressly excluded; there is no threshold; and the section applies notwithstanding section 194-IA, so the one per cent charge under that section does not apply to the same payment. Because the section does not disapply section 203A, a deductor under it requires a tax deduction account number and reports in the ordinary way. It arises in TDS Defaults, Capital Gains and House Property matters, on section 194-IC, section 194-IA, section 45(5A), section 203A of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Split the consideration in the agreement itself into the monetary component and the consideration in kind, and deduct only on the monetary component. Do not look for a threshold. There is none in the section; deduct on the whole of the cash consideration from the first rupee. Deduct at the earlier of credit to the landowner's account and payment, including on refundable or adjustable amounts described as advances, if they are credited as consideration. Where the agreement is one to which section 45(5A) applies, deduct under this section and not under section 194-IA; the opening non obstante clause settles the overlap. Where a payment is described as hardship compensation, rent for alternate accommodation, corpus or shifting charges rather than as consideration under the agreement, check whether it is consideration under the specified agreement at all before deducting — the library already carries Nathani Parekh Constructions Pvt Ltd v. ITO (TDS) and Sugee Seven Developers LLP v. ITO (TDS) on that question. Issue Form 16A and report the deduction in the quarterly return; there is no Form 26QB-style challan-cum-statement for this section.
Searched for later treatment; none was found. That is not the same as a source affirming it. Section 194-IC is unchanged. Five texts of it, spanning 2017 to the current one, print it in exactly the words this entry uses — notwithstanding s.194-IA, any person responsible for paying a resident any sum by way of consideration, 'not being consideration in kind', under the s.45(5A) agreement, deducting ten per cent at credit or payment, whichever is earlier — with no threshold and no amendment footnote against the operative words. No instrument amending it has been found. That is the strongest evidence available here, and it has a limit: an absence of amendment footnotes is not the same as a footnote saying the section is unamended. The commencement of the section has NOT been established, and the editor's note explains why the date carried in 'decided_on' is a labelled placeholder rather than a verified commencement. No judicial decision construing the section has been located. Two things a practitioner must supply for himself. Section 45(5A) has not been read for this entry, and whether a particular joint development agreement is a 'specified agreement' is decided entirely by that sub-section — who the transferor must be, what the agreement must provide and when the gain is charged. And the section 203A conclusion on this page is an inference from the statutory text rather than a holding; it is a strong inference, but it is not backed by any circular or judgment obtained here. What would displace the entry: an amendment to section 194-IC or to section 45(5A), or a circular addressing whether a deductor under this section may use a challan-cum-statement. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The section has been taken from five texts that print it word for word identically, every one headed 'Payment under specified agreement' in the Income-tax Act, 1961. NOT ONE of the five carries any amendment footnote against the operative words. The section's commencement date has therefore NOT been established from anything read here, and no claim is made about it. 'decided_on' is accordingly a LABELLED PLACEHOLDER and not a verified commencement: it is set to 1 April 2017, the start of the tax year corresponding to the earliest text on which the section is shown to exist in the very words printed above. Nothing legislative should be inferred from it, and the insertion should be dated properly before the date is used — either from a text that does carry a footnote list, or from a judgment reproducing the section with its amending Act. The only footnote carried anywhere on the section is the rules-and-forms note: 'See rules 30, 31, 31A & 37BA & Form Nos. 16A, 24G, 26B, 26Q and 27A'. The ten per cent rate and the 'not being consideration in kind' exclusion are identical across every text, which is the only evidence available here that the section has not been amended across that span. WHAT COULD NOT BE DONE. Section 45(5A) has not been read, and nothing about its conditions is stated on this page. Every text of section 45 examined is an older one printing sub-sections (1), (1A), (2), (2A), (3), (4), (5) and (6) and no sub-section (5A) at all. A practitioner must therefore read section 45(5A) himself before concluding that a particular joint development agreement is a 'specified agreement'. The section 203A point is an inference from the text as printed: section 194-IC contains no sub-section disapplying section 203A, whereas sections 194-IA(3), 194-IB(3) and 194M(2) each expressly do, all three read for this entry. It is supported by the difference in the Form numbers listed in the cross-reference notes for the four sections. It is not taken from any circular or judgment, and no CBDT circular has been obtained on the point. One further point of structure, because it is what makes the section unusual. Sections 194-IA, 194-IB and 194M each carry both a monetary floor and a sub-section disapplying s.203A; section 194-IC carries neither. The two features go together in the other three sections — a small, occasional payer, relieved of the TAN machinery — and their joint absence here is what puts a developer under the ordinary quarterly-return regime from the first rupee. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Deduction under section 194-IC is at ten per cent of the monetary consideration paid or credited under an agreement referred to in section 45(5A), whichever is earlier; consideration in kind is expressly excluded; there is no threshold; and the section applies notwithstanding section 194-IA, so the one per cent charge under that section does not apply to the same payment. Because the section does not disapply section 203A, a deductor under it requires a tax deduction account number and reports in the ordinary way.
TaxSphere, “Statutory position — s.194-IC: ten per cent on the cash consideration under a specified agreement, with no threshold at all, and the one section in this family that does not disapply s.203A”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-194-ic-specified-agreement-ten-per-cent-no-threshold-and-a-tan-is-needed/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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As a developer under a redevelopment agreement I pay tenants a monthly sum for alternate accommodation and a hardship allowance. The TDS officer says every sum paid under the agreement attracts section 194-IC at ten per cent. Is he right?
My joint development agreement is with a perpetual lessee, not the owner of the land. Do I deduct one per cent under section 194-IA or ten per cent under section 194-IC?
Four of us bought one flat and each of us paid under fifty lakh rupees. The TDS officer says we should have deducted under section 194-IA. Did we have to, and does the answer depend on when we bought?
I signed a joint development agreement before April 2018 and the project completion certificate came much later. Can I claim the benefit of section 45(5A) and defer my capital gain to the completion year?
