interest received from builder

This query is : Resolved

CA Abhishek Singh (Querist)
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25 March 2009 dear all
one of our client had deposited rs. 400000/- with a builder for booking a house unfortunatley he did not get house but builder paid him rs.800000 after four years. builder has told him to pay tax on rs. 400000/-.

i think this will come under head income from other sources and accordingly it will be taxed ? is builder liable to deduct t.d.s ?

Reetika Goel

Reetika Goel (Expert)
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26 March 2009 The intial booking amount deposited with the builders usually contains a clause that in case property is not alloted to you the builder shall make the refund of the above booking amount with a __% interest compounded annually or otherwise.

These clauses are inserted with an intent to lure the investors.

Since, the amount deposited with the builder i.e. Rs. 4,00,000/- has earned accretion & the refund amount received is Rs. 8,00,000/-.

The accretion accrued to your client is none other than Interest for the 4 years & is taxable in the year in which it is received under the head Other Sources.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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26 March 2009 Provided there was no contract of agreement to sale between the builder and the assessee othwerwise it would be taxable under income from capital gains being of relinquishment of right in the asset.

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