Demolition of supertech towers: refund tax liability?

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Rahul Sharma (Querist)
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22 April 2014 As per Honorable HC order - Supertech has been asked to demolish its 2 40 floor towers in Noida and asked the builder to give 14% interest.

Now assuming someone made a down payment in 2009 for 40 Lakhs using 30 Lakh Bank loan .. his compounded interest would be around 30 Lakhs.

Now My question is -- Will this income come under interest income and be taxable considering below points-

1) This is forced refund to buyers with 14% interest which is much lower than market rate of the flat in that area
2) The buyer has already been paying 10% interest on the home loan
3) The buyer will invest the money in a new property as soon as he gets it

Your advise will be appreciated here

V Uday Kiran

V Uday Kiran (Expert)
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22 April 2014 Hi rahul ,

Generally the interest payment received is taxable under the head Income from other sources ... Since this is a home loan , the interest and prinicipal both are eligible for deduction under different sections namely Sec 24 (HP) , Sec 80 C and 80EE (VI A Ded)... now the answer to your question is as follows ... for the diffrential rate which is 4% is taxable under the head income from other sources which is the benefit an individual is getting assuming that he has taken loan @ 10% ... irrespective of his investment in another house he is liable to pay the tax portion on the rest of 4% interest benefit received .... ( w r t Individual Perspective )

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Rahul Sharma

Rahul Sharma (Querist)
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22 April 2014 Thanks Uday for the reply.. Since bak loan interest was paid over last 5 years .. can we deduct that interest amount from the refund interest that will be given by the builder..

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V Uday Kiran

V Uday Kiran (Expert)
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22 April 2014 Yes please ... amount in excess of the interest amount should be considered for income tax purposes....