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Liquidated Damages in Construction: LD calculator and what the law allows

If a project finishes late, the client can deduct liquidated damages (LD) from your bills, up to a cap. Use the calculator for the LD on a delay, then read how CPWD's Clause 2 rate has changed, how extensions of time reduce it, and when courts cut LD down.

✓ Rate, delay, cap✓ Extension of time✓ Section 74 explained

By the True Site Sync team · Last updated 13 October 2026

LD calculator

Example: ₹1 crore contract, 60 days late, 15 days' extension granted → 45 days chargeable. At 1% per month, worked out per day: ₹1,50,000, well under the ₹10 lakh cap. At the older 1.5% rate it would be ₹2,25,000.

What are liquidated damages in a construction contract?

Liquidated damages are a pre-agreed amount the contractor pays for finishing late, usually a percentage of the contract value per week or month of delay, up to a cap. In India, Section 74 of the Contract Act limits the client to reasonable compensation, not more than the stated amount. CPWD's current conditions use up to 1% per month, capped at 10% of the tendered value.

CPWD Clause 2: 1% or 1.5%?

Copies of CPWD's General Conditions of Contract 2023 set compensation for delay at up to 1% per month of delay, worked out per day, with the total capped at 10% of the tendered value (GCC 2023 copy). Older CPWD forms used 1.5% per month, and many guides still quote that figure. Check which version your contract uses: the rate in your own agreement is the one that applies.

Extensions of time reduce LD

Delay caused by the client (late drawings, site not handed over, payment delays, extra items) or by events beyond your control is grounds for an extension of time. Days covered by an approved extension aren't chargeable. Two habits make the difference:

Auditors have flagged extensions granted without levying compensation as irregular, so clients increasingly insist on proper records before they agree to waive LD.

What the courts say: Section 74

General information, not legal advice. LD disputes depend on the contract wording and facts.

LD on RA bills

Clients usually deduct LD from running bills or the final bill. It appears as a separate deduction line, alongside retention and TDS. See the RA bill format. If LD has been deducted for a period later covered by an extension, ask for it to be refunded in the next bill.

In True Site Sync, an LD or delay penalty is recorded as its own deduction on the payment, with a mandatory remark, so you can see exactly how much was deducted, from which bill, and why.

Frequently asked questions

How are liquidated damages calculated in construction?

Contract value × LD rate per period × periods of delay, up to the cap. At 1% per month on a ₹1 crore contract, a 45-day delay costs about ₹1,50,000.

What is the LD rate under CPWD Clause 2?

Copies of CPWD's GCC 2023 set up to 1% per month of delay, worked out per day, capped at 10% of the tendered value. Older CPWD contracts used 1.5% per month.

What is the maximum LD in a construction contract?

Whatever cap the contract states; 10% of the contract value is common in Indian government contracts.

Can a client deduct LD without proving loss?

Under Section 74 the client gets reasonable compensation up to the stated amount. Courts have required some loss, but on public utility projects they have presumed loss from delay.

Does an extension of time cancel LD?

Days covered by an approved extension of time aren't chargeable. Record hindrances as they happen and apply promptly.

Can LD be deducted from RA bills?

Yes, clients commonly deduct it from running or final bills as a separate deduction.

LD kaise calculate kare?

Contract value × LD rate (jaise 1% prati mahina) × der ke mahine, cap (aksar 10%) tak. ₹1 crore ke kaam me 45 din ki der par 1% ke hisaab se lagbhag ₹1,50,000.

Know exactly what was deducted, and why

Every LD, retention and TDS deduction recorded against the bill it came from.

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