Compensation received for cancellation of property

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This discussion concerns the taxability of compensation received for a cancelled property deal, including a significant interest component. The core question is whether the compensation amount, initially treated as capital work in progress, should be taxed as a capital gain and under which specific section. Additionally, clarification is sought on the tax treatment of the interest received, which is currently proposed to be taxed under 'income from other sources'.

Nirad Sahoo

Nirad Sahoo (Querist)
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28 February 2020 Compensation amount of Rs.16441000+(interest of Rs.14152365) received for cancellation of property due to litigation whether taxable as capital gain, if it is taxable as capital gain under which section it is taxable, since agreement of sale entered and in Financial statement it is shown as capital work in progress . My client receives amount of Rs.16441000 which he paid intially through cheque above to that he is getting interest of Rs.14152365 which excluding TDS @11.96% whether this interest is taxable, if it is taxable under which section taxable . Kindly guide us

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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28 February 2020 This amount is taxable under income from other sources.

Nirad Sahoo

Nirad Sahoo (Querist)
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29 February 2020 Interest amount will be taxable as other source income but compensation amount taxable under which head and which section it is taxable

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