Compensation from Builder whether taxable ?

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This query is : Resolved

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A Pune resident is seeking advice on the taxability of compensation received from a builder due to delayed flat possession. The builder offers two options: a monthly rent payment subject to TDS or a credit note to offset the amount payable. The individual is unsure if the credit note option is non-taxable and wants to understand the tax implications of receiving cheques versus credit notes, especially when flats are booked under different names.

K.G.Shah

K.G.Shah (Querist)

05 August 2024 Dear Sir
I have booked two flats at Pune from welknown builder one my own name( Senior citizen and iinteredt ncome is 4 lakhs) and second on. my son name (his incone is under 30% slab) . Their was abnormal delay in construction. But unfortunately he has managed to get extension in RERA date. After lot of chaos and adverse publicity in media builder is agreed to pay Rent of 30 K per month till possession. He has given two option
1. Either to collect cheque subject to TDS deduction.
2. Get credit note which will be adjusted in amount payable to Builder .
I think second option will not be taxable. Is it correct ?
3) If opted 1st option of cheque under which head is taxable ?
4) Whether to collect cheque in my name and get credit not in my son name .. Whether this is good option from taxation point of view ?
Which will be better in taxation point. ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

06 August 2024 Collect cheque in both of your names for the purpose of taxation as you booked flat in both the names.

K.G.Shah

K.G.Shah (Querist)

06 August 2024 Sir, We have booked two flats, one my name (sr.Citizen) and second booked by my son who is taxable at higher rate. Builder will not give both cheques in my name. My issue is - whether compensation for delay of possession of flat is taxable ?
Second option is whether we opt for credit note from builder which will be adjusted against amount payable to him - is taxable ? If opted for cheque it is necessary to show in return as income ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

06 August 2024 Opt for second option which is not taxable.
First option taxable and show in return.

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