Interest earned in your case will be taxable as other sources income. You cannot claim Capital Loss against interest Income and since you will be filing a belated return, you will not be able to even carry forward the Capital Loss. However you can claim any interest expense that you incurred (actually not notional interest) against this interest Income. TDS shall not be deducted if he has returned just your deposits. if you did not gave any deposit and yet received money you can show Capital Gain/Loss against your property transfer. Howver as I said you will not be able to carry forward such Loss.
Refund the entire amount with compensation in the form of simple interest @11%
Booked a flat with a builder in 2010 and he failed to deliver the flat and offered possession after 6-7 years. We had approached the NCDRC and we opted for refund and NCDRC ordered in 2018, Refund of the entire amount with compensation in the form of simple interest @11%. Is the interest part which is as compensation in this case taxable. if yes then the interest paid builder minus the interest paid by us leaves us with much less amount than even the capital appreciation after indexation. Since the property has not come to us, can we file capital loss under capital gain head calculating the capital after indexation. We have again approached the NCDRC since builder has deducted TDS under section 194A1. We have not yet filed returns for 18-19 since we are in court and we want him to refund the TDS deducted wrongly with interest @ 11% from the date of the last payment made to the builder. Now the last date of filing the return is June 30th and our final hearing is 1st July 2020. (Just one day gap). Can we file interest factor as carry forward since the case is subjudice....It will highly appreciated if the answere can be supporterd by case studies, income tax judugments or other court judgements. Thanks in advance EMAIL [deleted]
Asked 4 years ago in Income Tax
Hello,
There are various case laws regarding this matter. One needs to verify your agreement, NCDRC Order for refund to check the applicability of any of such case laws to your case.
Interest received from the builder would be held taxable under the head Income from Other Sources. Relevant Interest Cost incurred for the same would be available as a deduction from the income.
Regarding TDS, as per case law, Pr. CIT Vs West Bengal Housing Infrastructure Development Corporation Limited (Calcutta High Court), TDS deduction on such compensated interest amount is not required.
I hope that this answer satisfies your requirements.It would be advisable to consult a practicing CA directly with details for better resolution.
Regards,
CA Hunny Badlani
https://abcaus.in/income-tax/compensation-builder-failure-give-possession-flat-non-taxable.html Hi Mr. Badlani, Thanks for your answer. The judgment that quoted itself says that interest on delayed plot is not taxable.Your answer is not clear, if as per you the interst recieved minus the expense (interest paid by us loan) is taxable then why TDS deduction is not applicable. I have quoted exact phrase used in the final order of NCDRC that "Refund of the entire amount with compensation in the form of simple interest @11%". it clearly says interest as compestion and not interest as interest, in the order each interest rate on different loans was calculated and only then the Hon' Judge arrived at the figure of 11%, which is part of the exaustive order. As far as the contract with builder is concerned it only mentioned that if we delay intalment then he will charge 24% interest and if he delays he is liable to pay 3% or so. Obviosly, there is no mention of refund of total amount. If you are suggesting that the amount of interest that builder paid minus the interest paid by is taxable, then what happened to the depriciation of my capital over the years....what about cost inflation index based on the inflation increasing (if not calculated in this case then decreasing) the value of my capital... Regrds Som Bakshi
Asked 4 years ago
I have specifically mentioned that one needs to verify your agreement, NCDRC Order for refund to check the applicability of any of such case laws to your case. There are various case laws ruling where the interest part has been held taxable and various others where the whole amount has been considered as not taxable. Regarding TDS Deduction, the case law mentioned by me is from the point of view of the deductor, on the point whether disallowance u/s. Section 40(a)(ia) should be made for non deduction of TDS on such compensated interest payment. No TDS Deduction does not mean that the sum isn't taxable at all.
I hope this helps. It would be advisable to consult a practicing CA directly with details for better resolution.
If the order says that the amount was just compensation and not interest then such amount will not be considered as interest u/s 2(28A) and thus won't be taxed under income from other sources.
There are various judgement in your support: https://taxguru.in/income-tax/payment-delayed-allotment-plot-land-cannot-construed-interest.html
However the case is debatable as AO would consider it as interest only so you consider it as capital receipt and non taxable but be ready to fight your case. https://timesofindia.indiatimes.com/business/india-business/interest-on-refunds-from-builders-adds-to-tax-burden/articleshow/60862862.cms
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you.
Dear Sir,
Hope you are doing well !!
As per my understanding, It would be treated as capital receipt and no tax would be applicable on the same.
It is advisable to take a phone consultation for detailed discussion.
Ok
- You can claim it as a relinquishment/extinguishment of asset and claim it as a capital asset.
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