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TDS on rent received on hardship compensation being rent on redevelopment of building

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This query is : Resolved

MAKARAND DAMLE (Querist)

25 July 2026 Builder has deducted TDS on rent paid on reallocation on account of redevelopment of building u/s 194IC as joint development agreement resulting in capital gains income.
However this is not capital gain and this rent is not taxable under income tax act.

My question is how to claim tds as prepaid tax and show this rent income as exempt u/s 10 because there is no specific sub clause u/s 10 to show this.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

26 July 2026 Hardship compensation (transit rent) received during building redevelopment is compensatory and not taxable under the Income-tax Act, even though builders may erroneously deduct TDS. To claim your TDS refund, disclose the amount under Exempt Income (Schedule EI) with a clear note explaining it as non-taxable transit rent, claim the full credit in Schedule TDS matching your Form 26AS, and be prepared to submit your redevelopment agreement if the tax department issues a mismatch notice.

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