Interest received from buider for failure of give possession of Flat
This query is : Resolved
Quick Summary
18 February 2024
Hello
Following are my queries
1) Interest received from builder for failure of give possession of flat is Taxable?
2) If the Interest received from builder for failure of give possession is taxable then in which income sources we have to require to report?
3) Any deduction is applicable for above interest receipt?
Following are my queries
1) Interest received from builder for failure of give possession of flat is Taxable?
2) If the Interest received from builder for failure of give possession is taxable then in which income sources we have to require to report?
3) Any deduction is applicable for above interest receipt?
CA Rashmi Gandhi
(Expert)
18 February 2024
1. Yes taxable
2. Income from other sources
3. If any legal expenses made to claim such interest.
18 February 2024
I have also 2 more queries:-
1) Where we have to report this interest in income from other sources in ITR?
2) I read somewhere there is 50% deduction assessee can claimed in ITR is it right ?
1) Where we have to report this interest in income from other sources in ITR?
2) I read somewhere there is 50% deduction assessee can claimed in ITR is it right ?
CA Rashmi Gandhi
(Expert)
18 February 2024
1. Interest from OThers
2. No you can claim actual expenses only.
17 August 2025
Additional Insights to Strengthen the Response:
The so-called “interest” awarded by builders for delayed possession is actually compensation for breach of contract, not a financial interest payment. Courts have clarified this is not true interest, so Section 194A (TDS on interest) does not apply.
Multiple judicial precedents and tribinal rulings treat such compensation as a capital receipt—not taxable under any income head.
The Supreme Court (June 2025) has ruled builders are not obligated to reimburse home loan interest paid by buyers—only contractual compensation can be awarded.
The so-called “interest” awarded by builders for delayed possession is actually compensation for breach of contract, not a financial interest payment. Courts have clarified this is not true interest, so Section 194A (TDS on interest) does not apply.
Multiple judicial precedents and tribinal rulings treat such compensation as a capital receipt—not taxable under any income head.
The Supreme Court (June 2025) has ruled builders are not obligated to reimburse home loan interest paid by buyers—only contractual compensation can be awarded.
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