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Tds provision

fakrudheen (Audit Assistant) (341 Points)

14 December 2015

we are builder, we build flat and whole flat sell to a one of the housing society on a square feet basis, also they relasing payment on work progress, question is whather TDS Deducted or not by the housing society when relasing payment to builder

project receipt from housing society 20 crore

project duration 3 years

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9 Replies

S. Shiroor (Others) (1207 Points)
Replied 14 December 2015

TDS will be deducted @ 2% by Hsg soc under sec 194 C.

fakrudheen (Audit Assistant) (341 Points)
Replied 14 December 2015

i think its sale, then how come it under the ambit of 194c

Ankit Taprania (CA FINAL ) (542 Points)
Replied 14 December 2015

if you are building flats using the material supplied by / purchasing from housing society then it is a WORK CONTRACT and therefore housing society should deduct TDS @ 2% . On the other hand if you are building flats on the basis of matrial purchase by you from outside party then it is SALES ( you are making a product and doing sales) on which there is no requirement to deduct TDS. Building as per specification of housing society is not relevant.

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S. Shiroor (Others) (1207 Points)
Replied 14 December 2015

It is a Contract between two parties - the Hsg soc and the builder. The builder is not selling the flats seperately to different ppl. It is executing the work as per Contract. Hsg soc has hired the builder to build flats for their members. Hence TDS needs to be deducted u/s 194C. However you can take an opinion from a CA.

kiran chhabhaiya (article) (79 Points)
Replied 14 December 2015

After having perusal of your question it appear that it is the case of work contract and not of a contract for sale. Thus based on that provision u/s 194C is applicable as per my opinion. However if it is an agreement for sale than it is subject to indirect tax and no tds liability will arise accordingly.

aman jain (Whatsapp group @ 9630455902) (86 Points)
Replied 15 December 2015

fakrudheen, as stated by u the project duration is 3 years, and payment being relesed in installments by the builder. it depicts a case of works contact and not a outrisht sale of flats by builder. and hence HsgSoc is reqd to deduct tds u/s 194C @ 2%

S. Shiroor (Others) (1207 Points)
Replied 15 December 2015

The statement that services are on squarefoot basis and Soc releases payment on progress basis itself indicates that land belong to Society and it could be rehabilitation/redevlopment /new Construction. Vat on materials and service tax on labour is another issue. But TDS should be deduted @ 2% u/s 194C

CA Amit Prakash Sharma (Chartered Accountant) (92 Points)
Replied 16 December 2015

As per query the builder is building flats and then transferring to society. In this situation it is clear that builder and society have executed separate built up agreement. As far as per square feet consideration is concerned, it is just remuneration to be paid by society to builder. Mere construction of flats does not transfer the ownership. Hence in this situation tds should be deducted as per the provisions of section 194C.

fakrudheen (Audit Assistant) (341 Points)
Replied 16 December 2015

actuallly its a banking staff, who incorporated a housing society and approch a builder, we wand some flats for our society members, that time builder & society prepare a MOU with deatils of number of flat, square feet & selling rate per square feet (including land), builder also find out land and register them to the society as security, also receive advance from society towards land cost, after land registering builder will prepare drawings & obtain permission from concerend authorities. next step builder & society prepare construction agreement and also prepare agreement for sales and construction with society member (purchaser), builder & society (tri parties)

quation is whether TDS applicable or not for society while releasing payment to builder

in builder concept its sale of flat to the society members through housing society