TDS on Redevelopers hardship allowance received not considered

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Sanjit

not applicable

94 Points Posted on 08 October 2026

I recently received my iTR intimation from CPC (for AY 2026-27). However, the refund was less than i had filed for. On scrutiny i have found that a whopping abount of Rs 75000 which was the TDS on the capital receipts of Rs 750000 (conmpensation for hardship allowance from redeveloper) has been altogether not considered. This amount of Rs 750000 was shown by me as exempt income with a comment when file my original retuirn. What can i do now as I have not encountered this before and in the previous year similar transactions went through without a problem.

Could someone please advice me what exactly to do and how?

Replies (2)

Quick Summary

If your tax refund is less than expected due to TDS on hardship allowance not being considered, don't accept it. Check your Form 26AS/AIS to ensure the TDS is reflected against your PAN. If it is, the issue likely stems from reporting the receipt as exempt income, causing the system to omit the TDS credit. You can file an online rectification under section 154 or, if necessary, a revised return under section 139(5) to claim the TDS credit and correct the income reporting.

Aashok Kumar Sharma

Finance/Compliance Consultant

69816 Points Posted on 08 October 2026

The person should not simply accept the reduced refund. If the ₹75,000 is genuinely hardship/displacement/rehabilitation compensation under a redevelopment agreement, there is substantial recent ITAT support for treating it as a capital receipt. The immediate practical step is to verify the 143(1) adjustment and 26AS/AIS and then file the appropriate online rectification u/s 154, while claiming the ₹75,000 TDS credit if it is reflected against the PAN.

Tax Garden

Tax Consultant

2036 Points Posted on 12 October 2026

Refund shortfall because of uncredited TDS is usually one of three things, so check in this order:

1. Form 26AS / AIS: is the Rs 75,000 TDS there against your PAN for FY 2025-26? If it is missing, the redeveloper's TDS return has a wrong PAN or wrong year. Ask them to file a correction statement. Nothing you do on the ITR side will fix that.

2. If it IS in 26AS: CPC normally gives TDS credit only against income that is shown in your return. You reported the Rs 7,50,000 as exempt, so the system saw TDS with no matching income and dropped the credit. The intimation itself will show this in the TDS credit table.

3. Fix route: if the numbers in the return were right and only the credit was missed, file a rectification request under section 154 on the e-filing portal (Services > Rectification). If you need to change how the receipt is shown, file a revised return under section 139(5), which stays open till 31 December 2026 for AY 2026-27.

On the treatment itself: whether hardship or displacement compensation is a capital receipt (reducing cost of the new flat) or taxable income depends on the redevelopment agreement wording, so keep the agreement and the redeveloper's TDS certificate ready. If the department sees the TDS, expect it to ask why tax was deducted on an amount you call exempt. Do not rely only on a forum comment about ITAT support, read the order and check it matches your facts.

Owner note: UNVERIFIED before posting: confirm on incometax.gov.in the s.139(5) last date (31 Dec 2026) and that rectification route applies to TDS credit mismatch. Suggested text cites no case law.