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Tax on refund and compensation from builder
Hi, I had booked a 2 bhk with a reputed builder in Chennai in 2015. The advance paid was about 12 lakhs. For the next 3 years, no construction happened on the ground. I filed a case in consumer court and builder was asked to pay back 15 lakhs (12 lakhs advance + 3 lakhs compensation which includes interest, legal fee etc. The builder has returned my money. I want to know what are my tax implications? Do I need to pay the tax on the compensation ( 3 lakhs) ? is there any tax liability on the principal amount as well? The builder has also not given me any receipt for the payment? Other than the Court order, do I need any legal doc or receipt to avoid tax-related hassles later on? Plz advise.
Asked 5 years ago in Taxation
8 Answers
No tax is payable on principal amount received by you
compensation received by you from builder may be taxable under head income from other sources
1) Yes, you have to pay 30% LTCG tax on interest of 3 lakhs as per the property gain for Index tax.
2) No need to pay tax on 12 lakhs as this is your capital assets amount these can by reinvest in the new Real Estate or flat or Bond as per IT act.
3) If you have court order and builder must have paid by cheque or online transfer ? show that transaction reference entry in your books of accounts.
The interest portion which you have received is taxable the other portion is not taxable.There is no tax liability on the principal amount as it was paid by you. The receipt is not required when there is court order for same.
It is a capital receipt and no tax is applicable. It is in the nature of compensation for a loss.
Yes total amount is taxable to the extent of the portion which has not been taken in account in any back financial years.
No it's not your income. No tax on the same
You need to pay income tax on the amount you received more than your investment, provided you have brought the principal amount into the account of the income tax returns at the time of making payment, so now you can claim it as refund amount and the income amount as income from other sources.
