TaxTMI 
TaxTMI 
Whether Delay Interest in delayed possession is Taxable / Exempted under IT Act ?
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....hether Delay Interest in delayed possession is Taxable / Exempted under IT Act ?<br> Query (Issue) Started By: - Rohit Sharma Dated:- 11-2-2025 Last Reply Date:- 16-4-2025 Other Topics<br>Got 1 Reply<br>Indian Laws<br>Furtherance to the order of RERA, whether the Delay Interest on account of delayed possession received by Allottee from the Promoter/Builder is Taxable under IT Act? If so, how can t....
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....he exemption are availed? Reply By YAGAY andSUN: The Reply: Great and very relevant question - especially with the increasing number of RERA-based orders in real estate disputes. Let's break this down: 🏗️ Scenario: * An Allottee (buyer) receives interest/compensation from the Promoter/Builder due to delayed possession, under RERA orders. * You're wondering: Is this delay inte....
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....rest taxable under the Income Tax Act? * If yes, how can exemption be claimed? 🔍 Is Delay Interest Taxable? ✅ Yes, the delay interest received by the Allottee is taxable under the Income Tax Act. Here's Why: * The compensation/interest received is treated as "Income from Other Sources" under Section 56. * It is not considered a capital receipt (like compensation for loss....
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.... of a capital asset), but compensatory interest, which is revenue in nature. 📌 CBDT Circulars & Case Law View: * CBDT has clarified in various contexts (e.g., compulsory land acquisition) that interest awarded for delay is taxable as income. * Similarly, courts have held that interest for delay in handing over possession is taxable unless it qualifies as a capital receipt (which is ra....
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....re - more on this below). 💡 Exemption or Tax Relief - Any Way Out? There is no blanket exemption, but depending on the nature and situation, some tax planning or relief is possible: 🧾 Option 1: Claim Standard Deduction u/s 57 * If taxed under "Income from Other Sources", you can claim deduction for expenses incurred to earn such income. * Generally, standard deduction @ 50% ....
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....may be allowed if the interest is under court/RERA order (based on some interpretations and AOs' discretion). 🔹 But this is not guaranteed, depends on your AO and case laws in your jurisdiction. 💼 Option 2: Tax it in the year of receipt (Not accrual) * As per Supreme Court (Dr. Shamlal Narula) and later rulings, interest awarded as compensation is taxable only on receipt basis,....
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.... not accrual. * So, if the interest was awarded over multiple years, you only pay tax in the year you actually receive it. 📋 Option 3: Spread the Interest Over Years (if for past period) If the RERA order clearly mentions that the interest pertains to delays over several years (say 3-4 years): * You can argue to spread the income across those years (on a reasonable basis). * While ....
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....not explicitly provided in the Act, this has been accepted by courts in interest from land acquisition, and could be adopted here. ✋ Not Exempt Under: * Section 10(10C), 10(10D), 10(37) etc. - These do not cover this type of compensation. * Section 54/54F (capital gain exemptions) - Not applicable unless it's compensation related to transfer of a capital asset (not possession delay). &....
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....#128204; How to Report in ITR? * In ITR-1 or ITR-2 (depending on your other income), under: * "Income from Other Sources" * Mention as "Interest received on delayed possession under RERA order" * Claim any eligible deductions under Section 57. ✅ Summary: Particulars Treatment Delay Interest from Builder under RERA Taxable Head of Income Income from Other Sources Exemption Ava....
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....ilable? ❌ Not fully exempt Deduction Possible? ✅ u/s 57 (case-specific) Taxable on Receipt basis (preferably) Spread Over Years? ✅ May be claimed if justified ITR Filing ITR-1 or ITR-2 (as applicable)<br> Discussion Forum - Knowledge Sharing ....