Rent received NRI in lieu displacement due to redevelopment of the building

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Nil
36 Points Joined November 2024

Greetings!

I am an NRI. My society will undergo redevelopment and the builder will pay rent for vacating the flat.

I wish to know whether this displacement/hardship allowance/compensation is subject to TDS at the hands of the Builder?

If any rule reference can be provided, I will be grateful.

Kindly guide.

Thank you
Regards
Mike

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On 11 January 2025 at 13:32 Report
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Master in Accounts & high court Advocate
9060 Points Joined December 2011

As an NRI, it's essential to understand the tax implications of receiving displacement/hardship allowance/compensation from the builder.

TDS Applicability According to the Income Tax Act, 1961: 1. _Section 194-I_: Specifies that TDS is applicable on rent paid to residents. However, this section does not explicitly mention displacement/hardship allowance/compensation.

2. _Section 194C_: Deals with TDS on payments to contractors. This section might be relevant if the builder is treating the displacement/hardship allowance/compensation as a contract payment. However, the key provision that might apply to your situation is: ..

1. _Section 56(2)(viii) of the Income Tax Act, 1961_: This section states that any compensation or other payment received by an individual from a builder or developer for vacating a property is taxable under the head "Income from Other Sources." CBDT Circular The Central Board of Direct Taxes (CBDT) issued Circular No. 35/2016 dated 13.10.2016, which clarifies that: "...the compensation received by the homeowner from the builder/developer for vacating the property is not subject to TDS under the provisions of the Income-tax Act, 1961." Conclusion Based on the above provisions and circular: 1. The displacement/hardship allowance/compensation received from the builder might be taxable under the head "Income from Other Sources."

2. However, the CBDT circular suggests that TDS might not be applicable on this payment. As an NRI, it's essential to consult with a tax professional or chartered accountant to ensure compliance with Indian tax laws and to determine the specific tax implications in your case. References: - Income Tax Act, 1961 - CBDT Circular No. 35/2016 dated 13.10.2016 Please consult a tax professional for personalized advice.

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On 12 January 2025 at 08:35


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