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The 2-Minute Summary
In a Joint Development Agreement (JDA), a landowner gives their land to a developer who constructs buildings on it. In return, the developer may give the landowner a share of the constructed units, cash, or both. TDS applies only on the cash portion. The in-kind portion (constructed units) is not subject to TDS.
The rate is 10% and there is no threshold. Every rupee of cash paid to the landowner under the JDA is subject to TDS from the first payment.
Example: A developer pays Rs. 20 lakh cash to a landowner as part of a JDA arrangement under Section 67(14) of the Act. TDS = 10% = Rs. 2 lakh. The developer deducts this before paying the landowner.
Under Income Tax Act 1961: Section 194IC of the Income Tax Act 1961. Now Section 393(1) Sl. No. 3(ii) of the Income Tax Act 2025. Rate and coverage unchanged.
At a Glance
| Item | Details |
| New Act Reference | Section 393(1), Sl. No. 3(ii) of Income Tax Act 2025 |
| Old Act Reference | Section 194IC of Income Tax Act 1961 |
| Who Deducts | Any person (typically the developer) |
| Rate | 10% |
| Threshold | Nil. TDS on every cash payment, from the first rupee. |
| Applies to | Cash consideration (not in-kind) under JDA as referred to in Section 67(14) |
| When Sl. 3(i) also applies | TDS deducted only under Sl. 3(ii), not both (Note 2 to Sl. 3) |
| Form for TDS Certificate | Form 16A |
| TAN Required | Yes |
What is a JDA under Section 67(14)
Section 67(14) of the Income Tax Act 2025 (old Section 45(5A)) deals with capital gains arising from JDAs. Under a JDA, the landowner transfers land to a developer and the developer constructs buildings. The landowner receives consideration in the form of:
- Constructed area (flats, commercial units) — in-kind consideration.
- Cash (monetary consideration).
- A combination of both.
TDS under Sl. 3(ii) applies specifically to the cash component. There is no TDS on the in-kind (constructed area) component at this stage. The capital gains tax on the entire transaction (both cash and in-kind) is dealt with separately under Section 67(14).
Nil Threshold: Every Rupee Counts
Unlike most TDS provisions, there is no minimum threshold for Sl. 3(ii). Even if the developer pays Rs. 1 lakh in cash to the landowner, TDS of 10% = Rs. 10,000 must be deducted. There is no exemption for small cash payments.
This is because JDA transactions typically involve significant sums, and the government wants to ensure tax collection at source on every payment.
Override Rule: Sl. 3(ii) Prevails over Sl. 3(i)
Note 2 to Sl. 3 states that where the same consideration attracts both Sl. 3(i) (property purchase) and Sl. 3(ii) (JDA cash), TDS is deducted only under Sl. 3(ii). This prevents double TDS on the same payment.
In practice, this means if a JDA arrangement includes a cash component that could also be characterised as purchase consideration, Sl. 3(ii) at 10% applies, not Sl. 3(i) at 1%.
Practical Compliance Checklist
- If you are a developer entering a JDA: identify any cash payments to the landowner and deduct 10% TDS on every payment from the first rupee.
- Obtain TAN before making any JDA cash payments. This provision requires TAN unlike Sl. 3(i).
- File quarterly TDS returns in Form 26Q and issue Form 16A to the landowner.
- Keep clear documentation separating cash and in-kind components of the JDA. Only the cash component attracts Sl. 3(ii) TDS.
JDA transactions are complex, and the TDS obligation under Sl. 3(ii) is easy to overlook because the in-kind component (flats) does not attract TDS. Make sure your transaction documents clearly identify the cash component and ensure TDS is deducted before each cash payment is released.
