Master in Accounts & high court Advocate
9615 Points
Posted on 14 March 2025
As the buyer of the land, you'll deduct TDS on the land purchase. For the construction contract with the builder, you'll need to consider TDS deduction under a different section. TDS on Construction Contract: You'll need to deduct TDS under Section 194C of the Income Tax Act, 1961, which deals with "Payments to contractors" [1]. This section requires TDS deduction on payments made to contractors or subcontractors for carrying out any work, including construction. TDS Rate: The TDS rate under Section 194C is: - 1% for payments made to resident contractors - 2% for payments made to non-resident contractors However, since the construction contract includes GST, you'll need to deduct TDS only on the amount excluding GST. Calculation: Construction contract amount: ₹70 lakhs GST (5%): ₹3.5 lakhs Amount excluding GST: ₹66.5 lakhs You'll deduct TDS on ₹66.5 lakhs. Statutory Compliance: 1. *Obtain PAN*: Ensure the builder provides their PAN, as it's mandatory for TDS deduction. 2. *Issue TDS Certificate*: Provide the builder with a TDS certificate (Form 16A) for the TDS deducted. 3. *File TDS Return*: File the TDS return (Form 26Q) quarterly, providing details of the TDS deducted. 4. *Deposit TDS*: Deposit the TDS amount with the government within the prescribed time limit. Consult a tax professional or chartered accountant to ensure you comply with all the requirements and regulations.