I have received an amount as a result of a verdict of a court case. I paid an amount to a builder with the promise of an apartment which was never delivered, hence I went to the consumer court (State and then National level). Finally after a decade court has directed the developer to pay me back the amount I paid plus interest for all these years. I have received around 80% of the amount last year in my bank account.
Can you please let me know if this amount is taxable or not? If taxable, which schedule and how should I calculate the taxable amount? An example calculation with an imaginary amount and interest rate will be extremely helpful.
Court Rules Refund Principal Non-Taxable, Interest Award Taxable Under Income from Other Sources Section An individual recovered a sum from a builder through a court verdict after the builder failed to deliver an apartment. The court awarded the original amount paid plus interest. The original principal amount is not taxable as it represents a refund of previously paid money. However, the interest awarded by the court is taxable under the head 'Income from Other Sources.' If only a portion of the total awarded amount is received in a financial year, the taxable and non-taxable portions should be calculated proportionately. The principal portion remains exempt, while the interest portion is fully taxable as income. The remaining amount yet to be received can be declared in the subsequent year's income tax return following the same proportionate basis. (AI Summary)
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