Tax treatment on redevelopment of building
This query is : Resolved
29 September 2008
I want to know tax implications in below cases:
1. Our building is under redevelopement and builder shifts us to another house for which we are paying rent and getting reimbursment of the same. So what is treatment of Rent recd from the redeveloper??
2. We also got corpus fund of Rs 200000/- each member, wht is the treatment of the same???
Whether both are taxable incomes?
Do provide the section reference.
Thank you in advance.
1. Our building is under redevelopement and builder shifts us to another house for which we are paying rent and getting reimbursment of the same. So what is treatment of Rent recd from the redeveloper??
2. We also got corpus fund of Rs 200000/- each member, wht is the treatment of the same???
Whether both are taxable incomes?
Do provide the section reference.
Thank you in advance.
29 September 2008
1. If you receive the rent it will be taxable as other income. If the builder directly pays you will escape.
2. Is this fund a gift or an advance?
2. Is this fund a gift or an advance?
29 September 2008
Suggestion given by Sri Raghavan for first part is an appreciable solution from tax planning point of view
29 September 2008
What is objective of Corpus fund which has been received by every member i.e 2 L
13 October 2008
What would be the treatment in following objectives:
1. If corpus fund is given to each member and not to the society? and
2. If the corpus fund is given to the society?
1. If corpus fund is given to each member and not to the society? and
2. If the corpus fund is given to the society?
Guest
Guest
(Expert)
12 February 2012
Not a singlle reply here
26 July 2025
Here’s a detailed explanation on **tax treatment on redevelopment of building**, based on your queries:
---
## 1. **Tax Treatment of Rent Received from Redeveloper**
* If **you (the owner) receive rent reimbursement or rent allowance from the builder (redeveloper)** for the alternate accommodation during redevelopment, then:
* **Rent received is taxable as "Income from Other Sources"** under **Section 56** (if it is not rent from letting property).
* You must **declare this rent as income** in your tax return.
* However, if the **builder directly pays the rent to the landlord of the alternate accommodation** (i.e., not routed through you), then you **do not receive any rent and hence no income arises**.
* This distinction is important from a tax planning perspective.
---
## 2. **Tax Treatment of Corpus Fund Received**
* Whether the corpus fund of ₹2,00,000 given to each member is taxable depends on its **nature and purpose**:
| Situation | Tax Treatment |
| ---------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Corpus fund given **directly to individual members** | Treated as **income from other sources** (Section 56), hence taxable, unless it is a **capital receipt** or a **gift exempt under Section 56(2)**. Usually taxable if linked to building ownership. |
| Corpus fund given **to society/trust** | Usually a **capital receipt** for the society; not taxable as income but may affect capital gains on property transfer by society. |
* Clarification on corpus fund objective is crucial:
* If corpus fund is **compensation for redevelopment or surrender of rights**, it may be taxable as capital gains.
* If corpus fund is a **gift without consideration**, may fall under gift tax provisions.
---
## 3. **Relevant Sections**
| Aspect | Section/Provision |
| -------------------------- | ------------------------------------------------------------------------------------------ |
| Rent received as income | Income from Other Sources – Section 56 |
| Corpus fund to individuals | Income from Other Sources – Section 56 (if taxable) or Gift provisions under Section 56(2) |
| Capital gains on property | Capital Gains – Sections 45/48 |
| Exemption on gifts | Section 56(2) |
---
## 4. **Summary**
| Item | Taxability | Notes |
| ----------------------------- | ------------------------------------------- | --------------------------- |
| Rent received by owner | Taxable under Income from Other Sources | If received by you directly |
| Rent paid directly by builder | No tax for owner | No income arises |
| Corpus fund to individual | Generally taxable as income unless exempted | Depends on nature of fund |
| Corpus fund to society | Not taxable as income for society | Capital receipt, affects CG |
---
If you want, I can help draft specific cases or provide references to case laws and circulars. Would you like that?
---
## 1. **Tax Treatment of Rent Received from Redeveloper**
* If **you (the owner) receive rent reimbursement or rent allowance from the builder (redeveloper)** for the alternate accommodation during redevelopment, then:
* **Rent received is taxable as "Income from Other Sources"** under **Section 56** (if it is not rent from letting property).
* You must **declare this rent as income** in your tax return.
* However, if the **builder directly pays the rent to the landlord of the alternate accommodation** (i.e., not routed through you), then you **do not receive any rent and hence no income arises**.
* This distinction is important from a tax planning perspective.
---
## 2. **Tax Treatment of Corpus Fund Received**
* Whether the corpus fund of ₹2,00,000 given to each member is taxable depends on its **nature and purpose**:
| Situation | Tax Treatment |
| ---------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Corpus fund given **directly to individual members** | Treated as **income from other sources** (Section 56), hence taxable, unless it is a **capital receipt** or a **gift exempt under Section 56(2)**. Usually taxable if linked to building ownership. |
| Corpus fund given **to society/trust** | Usually a **capital receipt** for the society; not taxable as income but may affect capital gains on property transfer by society. |
* Clarification on corpus fund objective is crucial:
* If corpus fund is **compensation for redevelopment or surrender of rights**, it may be taxable as capital gains.
* If corpus fund is a **gift without consideration**, may fall under gift tax provisions.
---
## 3. **Relevant Sections**
| Aspect | Section/Provision |
| -------------------------- | ------------------------------------------------------------------------------------------ |
| Rent received as income | Income from Other Sources – Section 56 |
| Corpus fund to individuals | Income from Other Sources – Section 56 (if taxable) or Gift provisions under Section 56(2) |
| Capital gains on property | Capital Gains – Sections 45/48 |
| Exemption on gifts | Section 56(2) |
---
## 4. **Summary**
| Item | Taxability | Notes |
| ----------------------------- | ------------------------------------------- | --------------------------- |
| Rent received by owner | Taxable under Income from Other Sources | If received by you directly |
| Rent paid directly by builder | No tax for owner | No income arises |
| Corpus fund to individual | Generally taxable as income unless exempted | Depends on nature of fund |
| Corpus fund to society | Not taxable as income for society | Capital receipt, affects CG |
---
If you want, I can help draft specific cases or provide references to case laws and circulars. Would you like that?
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