JDA development agreement of our land with revenue sharing

Since your JDA (Joint Development Agreement) is revenue sharing based, not area sharing, tax treatment depends on key facts:

• Capital Gains Tax likely applies at the time of entering into JDA (Section 45(5A) may apply if you’re individual/HUF and agreement is registered; tax triggered on completion certificate or possession date).

• The consideration (39% revenue share) will be treated as full value of consideration for capital gains.

• If you are doing this as personal landowner (not as business), capital gains tax applies. If you’re in the business of real estate (repeated transactions), then business income may apply — but in your case, likely capital gains.

• Since litigation was settled, your cost of acquisition will include the original purchase cost plus amounts paid to settle the litigation.

Since you're receiving monthly payouts under a revenue-sharing Joint Development Agreement (JDA), TDS must be deducted under Section 194-IC at 10% — even if the underlying income is capital gains.

Explanation:

• Section 194-IC of the Income Tax Act applies specifically to JDAs, where the consideration is in the form of revenue share or cash payments.

• It mandates that the developer (builder) must deduct 10% TDS on the monetary consideration paid to the landowner, regardless of the nature of income (capital gains or business income).

⚖️ This is independent of whether your income is taxed under Capital Gains or Business Head.

• So yes, even though your final tax treatment will likely be under capital gains, the TDS must still be 10% under 194-IC — not 1%.

Why 1% TDS (Section 194-IA) is Incorrect:

• Section 194-IA applies when there's a simple sale of immovable property (like a house or land) not part of a development agreement.

• Your case is not a sale, but a development deal, so 194-IA does NOT apply.

What You Should Tell the Builder:

"Since this is a revenue-sharing JDA, TDS should be deducted under Section 194-IC at 10%, as per Income Tax Act. Section 194-IA (1% TDS) applies only to sale of property, not for JDA monetary consideration. Kindly ensure proper deduction and provide Form 16A for each monthly payout."

- Whether the income arised from the JDA arrangement would be taxable under the head capital gain or Profits from business would depend on the multiple facts such as holding of land as stock in trade or investment, any Joint venture entered between the land owner and the builder, method of accounting etc.? 

- If monthly payout is a consideration under JDA then the rate of TDS should be 10% u/s 194-IC

For detailed discussion you may opt for phone consultation

As per Section 45(5A) of the Income Tax Act, capital gains tax liability arises in the year the completion certificate for the whole or part of the project is issued by the competent authority—not at the time of entering the JDA and its working shall be based on the stamp duty value of your share in the developed property on the date of the completion certificate, plus any cash received, minus the indexed cost of acquisition of the land

With respect to TDS Deduction you are correct that it will happen @10% and this TDS Deducted shall be adjusted against the actual capital gain you will offer as tax. TDS Will not affect due to capital gain working