Tax on interest from compensation of mact case

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Amwillsu (Querist)
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11 August 2011 What is the best way to calculate tax on interest of Rs. 30 lacs from Compensation amount of MACT case. The period is from 1997 to 2008. The person is 80% disabled now, and unable to earn any income. Also note the compensation as well as interest is lying as FD in bank and the person is just getting the interest of 4.5 lacs per year.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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22 August 2011 IN MY VIEW INTEREST AMOUNT WHICH HE IS GETTING AS RS 4.5 LACS IS TAXABLE.

HE CAN CLAIM DEDUCTION U/S 80U UP TO RS. 75000/-

1.60+.75=2.35 LACS

TAX CAN BE SAVED BY INVESTING THE AMOUNT U/ S 80C also.

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Amwillsu

Amwillsu (Querist)
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23 August 2011 Thanks a lot for the response. My query was with the interim amount of Rs. 30 lacs which is the interest gained from the compensation amount. It is understood this amount is taxable. But our point is since the case is not yet over, the opposite party has gone to the high court. This amount is kept as FD by the court. The court has allowed us to just use the interest of 4.5 lakhs, which is also taxable as you have also suggested.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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23 August 2011 The Max. Deduction U/s 80U is 1.00 lac.
Please note the change.

The amount of claim Rs. 30.00 lac is a capital receipt and is not taxable in the IT ACT.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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23 August 2011 The amount of Rs 4.50 lac of interest is not recoverable from the claimant in the
per view of the court decision.
.

It is revenue receipt, and as such it is taxable.

Amwillsu

Amwillsu (Querist)
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23 August 2011 I dont know i think i have confused the query.
In mact case of 1997, the district court gave its verdict and an interim compensation of 39 lacs + interest of 7.5% that is around 28 lacs was provided as interim by the court. So the court has put this amount in fixed deposits. My query is about the 28 lacs (I had written earlier 30 lacs adding some of their earnings). The case is not yet over, the opposite side (insurance company) has gone to the high court. So this FDs are kept under court's binding, we cannot do anything with this FD money. The court has only given us to enjoy the interest gained from this total FDs, that is around 4.5 lacs per year, for which we are paying tax every year.

Sorry for all the trouble!

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