Tax liability on compensation given by builder
This query is : Resolved
08 December 2024
Hi All,
I had bought a flat from a builder in Aug'23 by giving a booking amount and got my BBA executed in Mar'23. In the BBA terms there was a dispute b/w builder and the buyer due to which I had lodged a police complaint and a case in RERA against them.
Recently we both have mutually agreed to settle the matter on following terms by a settlement deed. The builder has cancelled my unit and refunded my amount and in Lieu of taking all my complaints back they have given an additional compensation.
Will this additional compensation over and above the amount i have given is taxable? I have gone through cases of such matter and found that it can be considered as a capital receipt as the compensation given is to relinquish my rights to sue and its a one time settlement and it's not my core business. If that is so will there be any tax liability?
The builder is forcing to deduct the 10 percent TDS kindly guide.
I had bought a flat from a builder in Aug'23 by giving a booking amount and got my BBA executed in Mar'23. In the BBA terms there was a dispute b/w builder and the buyer due to which I had lodged a police complaint and a case in RERA against them.
Recently we both have mutually agreed to settle the matter on following terms by a settlement deed. The builder has cancelled my unit and refunded my amount and in Lieu of taking all my complaints back they have given an additional compensation.
Will this additional compensation over and above the amount i have given is taxable? I have gone through cases of such matter and found that it can be considered as a capital receipt as the compensation given is to relinquish my rights to sue and its a one time settlement and it's not my core business. If that is so will there be any tax liability?
The builder is forcing to deduct the 10 percent TDS kindly guide.
08 December 2024
Yes, now it is taxable under IFOS.
08 December 2024
It has been taxed as capital gains as per following case.
Refer: 1. https://www.taxmann.com/post/blog/compensation-received-from-builder-for-its-failure-to-deliver-flats-in-time-taxable-under-head-capital-gains-itat
Refer: 1. https://www.taxmann.com/post/blog/compensation-received-from-builder-for-its-failure-to-deliver-flats-in-time-taxable-under-head-capital-gains-itat
08 December 2024
Thanks for the reply DhirajLal ji
Can you go through this case and let me know how can this be non taxable very similar case
https://taxguru.in/income-tax/compensation-relinquishment-right-sue-breach-contract-non-taxable-capital-receipt.html
Can you go through this case and let me know how can this be non taxable very similar case
https://taxguru.in/income-tax/compensation-relinquishment-right-sue-breach-contract-non-taxable-capital-receipt.html
08 December 2024
Each case differ on legal issues. There are different case laws based on such issues. some in favor and few in against.
The difference in your case is 'settlement' and not 'termination'.
Still you have option to go for appeal, but AO will consider it as taxable gain.
Refer: 1. https://www.taxscan.in/compensation-from-builder-on-cancellation-of-flat-taxable-as-other-income-itat/72538/
The difference in your case is 'settlement' and not 'termination'.
Still you have option to go for appeal, but AO will consider it as taxable gain.
Refer: 1. https://www.taxscan.in/compensation-from-builder-on-cancellation-of-flat-taxable-as-other-income-itat/72538/
09 December 2024
The entire settlement agreement is on the basis of relinquish my legal rights that I can't sue them and have to take back my court case and police complaint.
Such a receipt is considered as a capital receipt and there are some good examples given in the below article
https://www.livemint.com/Money/HH8J6nA5zEz6uE71wwxANM/The-only-receipt-that-remains-taxexempt.html
Such a receipt is considered as a capital receipt and there are some good examples given in the below article
https://www.livemint.com/Money/HH8J6nA5zEz6uE71wwxANM/The-only-receipt-that-remains-taxexempt.html
09 December 2024
Its trivial issue, rest upon judiciary to decide.
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