A demand letter for a construction-linked plan should state the stage reached and the date it was certified, the instalment as a share of the agreement value, GST on it, the TDS the buyer must deduct and deposit, any overdue amount and interest, the due date, your bank details and the total payable. If any of these is missing, expect calls instead of payments.
This article gives the fields in order, a filled-in example with sample figures, and the tax points that most often go wrong.
The fields, in order
- Letterhead and RERA registration number of the project.
- Letter number and date, unique per buyer and demand, so a receipt can quote it.
- Buyer details: names of all applicants, unit, tower, floor and booking reference.
- The stage: as named in the agreement for sale’s payment schedule, for example “Completion of 7th slab”, with the date it was certified.
- The instalment: the percentage from the schedule and the amount.
- GST: rate and amount, shown separately.
- Overdue: unpaid amounts from earlier demands, with the interest on them to date.
- TDS: the amount the buyer must deduct and deposit, your PAN, and the section and form.
- Total payable and due date, with what happens if it is missed.
- Bank details of the account named for collections, and how to quote the letter number.
- Signature, and a contact for questions.
A filled-in example (sample figures)
Sample flat: agreement value ₹90,00,000, not affordable housing, in a project that began after 1 April 2019, on a construction-linked plan. The 7th slab was certified on 2 November; the schedule puts 5% at this stage. ₹1,20,000 of the 6th-slab instalment (its GST already paid) is 45 days overdue; interest is worked at 10.95% a year (see the interest line below).
| Line | Amount |
|---|---|
| 7th-slab instalment (5% of ₹90,00,000) | ₹4,50,000 |
| GST on the instalment (5% effective) | ₹22,500 |
| Overdue from the 6th-slab instalment | ₹1,20,000 |
| Interest: 1,20,000 × 10.95% × 45 ÷ 365 | ₹1,620 |
| GST on that interest (5% effective) | ₹81 |
| Total payable by 17 November | ₹5,94,201 |
| TDS the buyer deducts (1% of ₹4,50,000 + ₹1,20,000) | ₹5,700 |
| Amount to transfer to the builder | ₹5,88,501 |
The letter should then say, in plain words: deduct ₹5,700 as TDS under s.393(1), Table serial 3(i), of the Income-tax Act 2025, deposit it with Form No. 141 quoting our PAN, and send us Form No. 132. TDS applies because the flat’s price is over ₹50 lakh; the rate is 1% of the price or the stamp duty value, whichever is higher. It is deducted when an amount is paid or credited, whichever is earlier, so the buyer deducts it on the overdue 6th-slab amount now, when paying it, unless it was already deducted. Whether TDS is worked out with GST and interest or on the instalments alone is a point for your CA; this example uses the instalments alone.
The GST points that go wrong
- The rate. In a project that began on or after 1 April 2019, or an ongoing project where the builder did not choose the old rates, a residential apartment other than affordable housing carries GST of 7.5% (3.75% central plus 3.75% state) without input tax credit, and an affordable one 1.5% (0.75% plus 0.75%). These are the entries Notification 03/2019-Central Tax (Rate) inserted into Notification 11/2017.
- The one-third land deduction. Paragraph 2 of Notification 11/2017, which applies to these entries, deems the value of the land to be one third of the total amount charged, so GST applies to two-thirds: 7.5% × 2/3 = 5%, and 1.5% × 2/3 = 1% of the instalment. The Tax Research Unit’s real estate FAQs of 7 May 2019 give the same effective rates of 5% and 1%.
- Affordable housing means a carpet area up to 60 square metres in a metropolitan city or 90 square metres elsewhere, and a gross amount of not more than ₹45 lakh. The metropolitan cities are Bengaluru, Chennai, Delhi NCR (Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (the whole of MMR). The gross amount includes the land and other charges such as parking and preferential location.
- The 2025 and 2026 rate changes left flats alone. The GST Council’s 56th meeting cut GST on cement from 28% to 18% from 22 September 2025. Notification 15/2025-Central Tax (Rate), which brought in that meeting’s service rates from the same day, raised three works-contract items under serial number 3 of Notification 11/2017 (items (vii), (viii) and (x)) to 18%, but did not change the residential entries (ia) to (id). Notification 06/2026-Central Tax (Rate), in force from 1 November 2026, does not touch serial number 3 or paragraph 2. The 7.5% and 1.5% rates above are the rates in force on 9 November 2026.
- Interest is taxed too, at the flat’s effective rate. Section 15(2)(d) of the CGST Act includes interest for delayed payment in the value of the supply, and paragraph 9 of Circular 178/10/2022-GST says late-payment interest “should be assessed at the same rate as the principal supply”. Because the interest becomes part of the value of the flat’s supply, paragraph 2’s one-third land deduction applies to it as it does to the instalment: 5% effective, or 1% for affordable housing. That is our reading; no circular, ruling or Tax Research Unit FAQ we found says it in terms. Charging 18% treats the interest as a separate service, which Circular 178 rejects. The cautious alternative is 7.5% on the full interest (₹122 instead of ₹81 in the example above); agree the treatment with your CA.
- Sales after completion. These entries do not apply where the entire consideration is received after the completion certificate is issued or after first occupation, whichever is earlier.
The interest line
Section 19(7) of the RERA Act makes a buyer liable for interest on late payment at the rate the state’s rules prescribe, and section 2(za) says that rate must equal the rate the builder would pay the buyer for its own default. In Maharashtra, rule 18 of the RERA Rules 2017 sets it at SBI’s highest MCLR plus 2%: 10.95% a year with the MCLR in force from 15 October 2026 (8.95% for the three-year tenor).
In the example above, that is ₹1,620 on ₹1,20,000 for 45 days. Show the rate and its date, the overdue amount and the days on the letter, so the buyer can check it. See the glossary entry on the demand letter for the terms used.
Common mistakes
- Raising the demand before the stage is certified, or without the certificate date.
- One letter to the first applicant only, when there are co-applicants.
- GST worked out on the full amount at 5% in one place and on two-thirds at 7.5% in another, with different rounding.
- Old section and form names (“194-IA”, “26QB”, “16B”) on demands raised after 1 April 2026, when the Income-tax Act 2025 came into force.
- No letter number, so receipts cannot be matched to demands.
How LoftRay raises demands
LoftRay raises demands from certified construction milestones, with tax charges and TDS sections from rules your team approves during setup. Demands can be corrected or reversed, and interest on late payment, overdue amounts and buyer statements come from the same records. Demand notices and payment reminders can go by email through your own mail service and on WhatsApp from your own business number.