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Taxability of Income from Government grants

Vishwas V Rao ( Chartered Accountant) (239 Points)

26 November 2010

Suppose a government grant has been received and is found to be excess. Such excess is kept as an FD as per the terms of the grant. Then in such a case is the interest received from such fd taxable.??

And if such grant is received for an asset which is WIP...can we reduce the interest income from the asset value.??

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3 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 27 November 2010

The interest earned from the excess grant received should be shown as a Liability.

CA Girish Kumar S (B.Com(Hons), CA) (61 Points)
Replied 27 November 2010

Hey,

According to me , first of all we need to consider the taxability of the receipt of grant- if the grant is in Capital nature i.e for ex purchase of capital asset then it would be exempt, if the same is recd for revenue purposes i.e for ex refund of duties paid the same would be taxable.

Secondly - the income earned from such grant is definitely taxable in absence of any explicit exemption.

Member (Management) (325 Points)
Replied 28 November 2010

Originally posted by : Girish Kumar
	Hey, According to me , first of all we need to consider the taxability of the receipt of grant- if the grant is in Capital nature i.e for ex purchase of capital asset then it would be exempt, if the same is recd for revenue purposes i.e for ex refund of duties paid the same would be taxable. Secondly - the income earned from such grant is definitely taxable in absence of any explicit exemption.