TDS on Payment Under a Specified Agreement
A specified agreement commonly refers to a qualifying real-estate joint development arrangement under which an individual or Hindu undivided family permits development of land or a building in return for a share in the developed property together with, or without, monetary consideration. The TDS rule historically appeared in Section 194-IC of the Income-tax Act, 1961.
What was Section 194-IC?
Legacy Section 194-IC applied notwithstanding Section 194-IA. It required a person responsible for paying a resident monetary consideration under the specified agreement referred to in Section 45(5A) to deduct tax at source. Consideration in kind was outside the wording of Section 194-IC.
Connection with Section 45(5A)
Section 45(5A) of the 1961 Act created a special capital-gains timing rule for an individual or HUF entering into a qualifying specified agreement for development of a capital asset being land or building or both. Subject to the statutory conditions, capital gain was generally linked to the year in which the competent authority issued the certificate of completion for the whole or part of the project.
Section 194-IC complemented that regime by requiring TDS on the cash or other monetary component paid under the qualifying agreement.
What is a specified agreement?
For the legacy Section 45(5A) regime, a specified agreement was a registered agreement in which a person owning land or a building or both agreed to allow another person to develop a real-estate project on that property in consideration of a share in the developed land or building or both, with or without payment of part of the consideration in cash.
Legacy TDS rate and timing
The 10 percent rule applied to the monetary sum covered by Section 194-IC, not to consideration in kind. The actual tax treatment of the landowner's capital gain and the developer's obligations must be examined separately under the applicable substantive provisions.
Why Section 194-IA did not govern the same payment
Section 194-IC began with a non-obstante clause overriding Section 194-IA for the specified monetary consideration. This avoided treating the same qualifying JDA payment merely as an ordinary purchase consideration payment under the property-TDS rule.
Transition to the Income-tax Act, 2025
The Income Tax Department explains that TDS provisions from Sections 192 to 194T of the 1961 Act have been consolidated into Sections 392 and 393 of the Income-tax Act, 2025. Section 392 concerns salary; Section 393 covers other specified payments.
The governing Act depends on the earlier of credit or payment. If that triggering event occurred on or before 31 March 2026, the 1961 Act applies. If it occurs on or after 1 April 2026, the corresponding withholding provision of the 2025 Act applies.
| Triggering event | Applicable framework | Section reference |
|---|---|---|
| Earlier of credit or payment on or before 31 March 2026 | Income-tax Act, 1961 | Legacy Section 194-IC, where its conditions are satisfied |
| Earlier of credit or payment on or after 1 April 2026 | Income-tax Act, 2025 | Relevant Section 393 table item applicable to the payment |
Specified agreement TDS and Form 141
Form 141 is the current unified PAN-based challan-cum-statement under Section 393(1), but the Income Tax Department presently lists its four schedules for specified individual/HUF rent, transfer of immovable property, specified individual/HUF contractor or professional payments, and virtual digital assets. A specified-agreement payment should therefore not be placed into Form 141 merely because it concerns real estate; the deductor should use the reporting mechanism prescribed for the applicable Section 393 table item.
Practical checklist for a joint development agreement
Check the agreement: determine whether it satisfies the statutory definition of a specified agreement and whether registration requirements are met.
Identify the landowner: verify whether the special capital-gains regime applies to the relevant taxpayer and transaction.
Separate cash and kind: identify monetary consideration separately from the landowner's share in developed property.
Apply the transition date: determine whether the earlier of credit or payment falls before or after 1 April 2026.
Use the correct current section: for post-1 April 2026 events, quote the applicable Section 393 table item rather than legacy Section 194-IC.
Use the prescribed reporting route: do not assume Form 141 applies unless the transaction falls within one of the Form 141 schedules.
Related Income Tax provisions
TDS on transfer of immovable property: legacy Section 194-IA
Rent paid by certain individuals or HUFs: legacy Section 194-IB
Rent TDS: legacy Section 194-I
Commission, brokerage and property TDS
For a current JDA or development agreement, verify the exact Section 393 table item, rate, reporting section code and substantive capital-gains provision applicable to the transaction and tax year.