INCOME TAX ON REDEVELOPEMENT OF FLAT

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This query is : Resolved

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A flat owner sought tax treatment of rent and lump sum compensation received during redevelopment. The reply stated that compensation is tax-free to the extent actually used for alternate accommodation, with any excess taxable. Capital gains exemption under Section 54 is available on the redeveloped flat.

NIRMAL DAVE

NIRMAL DAVE (Querist)

03 July 2026 Dear All,

I have a flat which is currently under redevelopement scheme. The flat is neither self occupied nor rented out.

I received monthly Rent of Rs. 10,000/- and lump sum amount of Rs. 2,00,000/- as a compensation from developer.

Please guide me whether rent and lump sum compensation received is taxable?

Please also guide me on applicability of capital gain & exemption under section 54 in such redevelopement case.

Thanks & Regards
Nirmal

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

03 July 2026 Rent and any other compensation are tax-free to the extent it is actually used. e.g. if rent paid is less then the received amount, the excess is taxable.
The redeveloped flat is exempted u/s. 54 based on old flat being handed over.

NIRMAL DAVE

NIRMAL DAVE (Querist)

03 July 2026 Thank You Sir for your valuable reply.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

04 July 2026 You are welcome.

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