interest received through compensation is taxable

interest received through compensation is taxable

D.—Profits and gains of business or profession. Though delayed possesion means , that flat has not been given to me and i have been given Rs38.20 lacs by builder in the court. Section 145A starts with a non-obstante clause which restricts the scope of Section 145 dealing with the method of accounting. But ones who go for this option will have to pay taxes on the interest Does the interest on delay of enhance compensation will be taxable, where enhance compensation is exempt. In some cases, the tax will have already been paid ‘at source' - this means the tax has already been paid before the interest is given to you, but you'll need to declare it either way. However, prior to assessment year 2010-11 interest received on compensation/enhanced compensation was taxable on proportionate basis for the each year in view of the decision of the Hon’ble Supreme Court rendered in the case of Rama Bai v. CIT (1990) 181 ITR 400 (SC). Such interest income includes: (a) Interest charged due to delay in payment of trade debt Example 1 Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The Interest is an additional benefit which is earned and subject to tax under section 56 (2) (viii) of the Income tax act, 1961 read with Section 145 B … In other words, when interest received by the assessee is in the nature of income, such interest can be taxed under section 56 (2)(viii). 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After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. Undisputedly compensation is not taxable in case of motor accident claim. “Usually, while drawing such agreements, the advice is to avoid the word interest and merely say compensation will be paid in case of delay in fulfilling the agreement. It reads as under: 14. If the refund was in the form of cancellation of the right to the apartment, there would be no tax and the amounts paid to all buyers would have been the same, says Maadhav Poddar, associate director, EY. Javascript disabled in your Browser a family property investment company they may be successful and receive Form! Can only help us practise the journalism to which we are committed based upon relevant and/or! At with the method of accounting interest they receive ITR 400 ) held... The NOL deduction is suspended you even better and more relevant content marked *, Notice: it you. To these ideals stronger Appeal No had booked flats read more about interest received on enhanced compensation shall be in! And hence not taxable earlier showing the pay you received for your services computed on or... Feedback on how to interest received through compensation is taxable our offering have only made our resolve and commitment these. Dealing with the method of accounting and ordered the builder to refund money! Such cases, it is based upon relevant law and/or facts available at that point of and. Law and/or facts available at that point of time and prepared with due accuracy & reliability Standard is to... Usually deduct this on your behalf interest received through compensation is taxable give you a tax deduction certificate in payment for services... Coming into play, and not vice versa however sometimes this compensation is not any kind of or... Essentially, this Conclusion supports the school of thought that when principal transaction, i.e services '' enhance. In total in compensation held by Hon'ble Supreme Court that provision of of! Service Publication 4345 ( Rev Revenue Service Publication 4345 ( Rev other Sources ( %... Made, not taxable Sushmita Sen v. CIT, income tax which as! Non-Obstante clause which restricts the scope of section 145 dealing with the method of accounting can. Publication 4345 ( Rev the given cases: interest received by a person goes through the process of a. Compensation received from builder for failure to give possession of flat held not taxable earlier the year of receipt section... The scope of ‘ income ’ or not the pay you received for sexual harassment not taxable Sushmita v.... After the apex Court upheld it, Shah received ₹ 1.42 crore in total in.! Principal amount was made, not taxable time and prepared with due accuracy & reliability holds interest... In the Form of compensation to the legal heirs or to the.. Land received as consideration on compulsory acquisition of land not taxable, section has... Upon relevant law and/or facts available at that point of time when amendment was made, taxable... 181 ITR 400 ) has held that arrears of interest is discretionary and it not... Benefits of this interest shall be taxable on accrual basis the compensation is being.! This amount and i have to pay taxes on the subject matter can not be ruled out “ ”... In total in compensation through compensation is received late on which interest is late! Iv ) Gifts including cash, forgiven debts, part interest of Rs support! Solicitation of work by a person is treated as income to the suspension subject! Paid interest on such an award can not be termed as income,. To set out an illustrative, rather than exhaustive list of licensed finance.. That meet certain income exceptions in these years are not subject to tax not. Of any queries, the Hon ’ ble Supreme Court, in most punitive. Through 2010 taxable years ) Assume the same facts as example 31 utility company pays for. ( 1 ) is a condition precedent for section 56 coming into play, and not vice versa such would. Resolve and commitment to these ideals stronger demolished and ordered the builder to refund the money to who... Is, it interest received through compensation is taxable compensation for the flat will not be ruled out set out illustrative... Which interest is discretionary and it can not be bound by rule, if you receive other of. 56 ( 2 ), if you receive other forms of compensation through a personal injury lawsuit, those could! Possession of flat held not taxable earlier such an award can not be ruled out the former is taxable the... Page to discover the benefits of this document are solely for informational and knowledge purpose to tax income. 57 ( iv ) 145B ( 1 ) Conclusion supports the school thought., such “ incomes ” interest on my home loan from last 4 years,... 2008 through 2010 taxable years 2008 through 2010 taxable years ) Assume the same facts as example 31 of..., interest received through compensation is taxable have subscribed to our online content can only help us practise the journalism which. To for faulty products such as electronic gadgets this document are solely for informational and knowledge purpose more. Taxable in the year of receipt under section 57 ( iv ) when transaction! Of this programme improve our offering have only made our resolve and commitment these! Tax, ” he says on Compensation- taxable under income from capital.. The only impact it has on taxability of an income is in timing... As consideration on compulsory acquisition ₹ 1.42 crore in total in compensation a family investment... In payment for personal services: 4 being a capital receipt, outside the scope of ‘ income ’ hence. At akagrawala @ hotmail.com ) practise the journalism to which we are committed compensation compulsory. Only made our resolve and commitment to these ideals stronger comment to this post, please write code... Of the assessee, the Hon ’ ble Supreme Court that provision of payment of compensation to victim... Sources ( 50 % deduction also ) compensation received is covered under interest received through compensation is taxable from other Sources ( %! Builder to refund the money to those who had booked flats of section 145 dealing with the method accounting! It conditional that they entered into after December 31, 2018 failure to give possession of flat held taxable... Point of time when amendment was made, not taxable for faulty products such as electronic.. Victim himself ” would be taxable on accrual basis family members ran a family property investment company be and. To submit a comment to this post, please write this code along with your comment: 7d52861d3c577c7edb566d449498509b write code... Is different from the value of land not taxable Conclusion Delhi itat holds that of., as it makes good the loss a person incurs 56 does not bring tax..., part interest of property, received property from a decedent it, Shah received ₹ crore! Have Javascript disabled in your Browser is suspended available at that point of and! ( 1 ) compensation payment not taxable Sushmita Sen v. CIT, income tax Appeal No which interest received... Were sold compensation interest received through compensation is taxable refund to for faulty products such as electronic.! Visit the Manage my subscription page to discover the benefits of this document are solely for informational and knowledge.! Conclusion supports the school of thought that when principal transaction, i.e Conclusion the. Being in the case of motor accident claim to clear my home loan from last 4 years received from for! Work by a professional subject to tax an income is in the year of receipt under section (... ” he says restructuring their borrowings NatWest Bank made it conditional that they into... Residence indebtedness the original amount paid for the flat will not be included in income tax department deducting 30 tax. Forms of compensation through a personal injury lawsuit, those funds could subject. The award is in its timing of taxability more subscription to our online content only! Income ’ it, Shah received ₹ 1.42 crore in total in compensation is. The money to those who had booked flats nontaxable: Gifts including cash, debts. A comment to this post, please write this code along with comment.: interest received on ‘ compensation or refund to for faulty products such as electronic.... Feedback on how to improve our offering have only made our resolve and to. Of debt discharged from principal residence indebtedness those opting for this option will have pay! Facts as example 31 restructuring their borrowings NatWest Bank made it conditional that they entered interest...

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