OWN BUILDING CONSTRUCTION BY CO-OWNERS AND TDS IMPACT

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Querist : Anonymous

Querist : Anonymous (Querist)

11 May 2011 KIND ATTN. SIR WITH REGARD TO CONSTRUCTION OF A BUILDING IN THEIR OWN LAND ( THE ASSESSEE, THE ASSESSEE’S WIFE AND HIS SON ARE THE CO-OWNERS OF THE LAND ) STARTED CONSTRUCTION OF A COMPLEX . THE SOURCE OF FUNDS ARE PROVIDED BY HIS SON FOR HIS PART AND WITH REGARD TO HIS FATHER AND MOTHER , HE GRANTED A LOAN TOTHEM FOR THE CONSTRUCTION PURPOSE. THE FUNDS ARE TRANSFERRED TO BANK ACCOUNT OF HIS FATHER ,THE ASSESSEE FOR OPERATION PURPOSE AND LATER ON PAYMENTS ARE MADE TO RESPECTIVE PARTIES OF BUILDING CONTRUCTION WORK. TDS HAS TO BE DEDUCTED FOR THE SERVICES RENDERED BY THE ARCHITECTS AND BUILDERS. WITH REGARD TO PRACTICAL OPERATION , WHETHER IT WILL BE BETTER TO MAKE PAYMENTS THROUGH ONE BANK ACCOUNT AND DEDUCT TDS THROUGH RESPECTIVE OWNERS ACCOUNT, ORELSE OPTION II: COMPETE THE OPERATIONS FULLY IN ONE ACCOUNT AND LATER ON PASS THE BUILDING ACCOUNT JOURNAL ENTRIES TO RESPECTIVE CO-OWNERS. OPTION III: SEPARATE FIRM BOI FOR THE PURPOSE OF CONSTRUCTION OF THE BUILDING AND IN FUTURE IT WILL BE LET OUT FOR RENT AND THEIR INCOME WILL BE UNDER INCOME FROM HOUSE PROPERTY. KINDLY SUGGEST THE BEST WAY TO OPERATE PRACTICALLY AND FOR INCOME TAX PURPOSE. NOTE: THE ASSESSEE’S SON IS AN OVERSEAS CITIZEN OF INDIA.
WITH REGARDS
CA.P.SHANGAR

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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17 May 2011 Dear Friend,
Under Section 194C, sub section (4) clarifies that there is no need to deduct TDS on the sum credited or paid to a contractor for construction meant for personal purpose. It is advisable to make payments from individual accounts on proportionate or actual basis.

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