Interest from Delay in Possession of Flat

This is a highly debatable issue. According to the Income tax act, revenue receipts are taxable and capital receipts are not taxable. What is most important in such a case is the agreement between the buyer and the builder. One will need to see how the clause relating to the payment of interest is worded. If the compensation is in the nature of interest, then it is clearly taxable. If it is worded in a manner that it is a compensation for hardship caused due to the delay, then there is a possibility of arguing that it is not taxable. However, if the builder deducts TDS from it then it will be very difficult for you to convince the tax officer that it is not taxable.

Thank you for your valuable comments sir.

My Pleasure.