Loss on house property

Tax queries 254 views 6 replies

Hi Friends,

One of My clients has taken a Loan for house property jointly with his husband.

As the construction was tend to be completed within 2 years but not completed she received an interest of Rs.20000 from the Biuilder for Delay which comes after deducting TDS of 10%

Can she take the benefit of 80C or Sec 24a as she is a salaried employed and the tax burden falls @ 30% on such intrest of which she is unknown till now.

Note: The Return to be filed will be Belated.

Please help me with the matter as i does nt want more delay in return filing.

 

 

 

 

Replies (6)

Section under which TDS is deducted, itself will  give you head of income!!!

Income is Interest... and TDS is Deducted @ 10% us 194A .

But my question is can she claim the benefits of the interest as the burden of tax is coming on the income she is receiving but no benfit has been taken against the Loan.

Yes, you may claim it as compensation of interest paid to bank.

thanks 

is there any case law or provision to sustantiate the statement,

 

Please provide if their is as my client would require evidence.

There are no specific case-laws or notifications in this regard, and hence the issue is still debatable.

The builders have been given liability to deduct TDS @ 10% over the compensation amount u/s. 194A. And as such mostly it is argued to be interest income in the hand of purchaser, to be charged under income from other sources. But it is counter argued in two ways as follows: 

1. The judgement of Hon’ble Supreme court in the case of CIT vs M/s Saurashtra Cement Limited 2010-TIOL-49-SC-IT , the compensation paid to assessee was awarded as Capital Asset, as the loss was of capital nature. 

Most of the cases of the compensation given by builders are built over the judgement take the compensation as Capital asset, and reduce the cost of aquisition of the property to that amount. Based on the view the compensation is non-taxable.

2. But It may not be loss of capital nature in all cases, and when the assessee has been paying additional interest on housing loan for delay of possession, the compensation given is to compensate that additional cost. The same view is supported in Real Estate Regulation Act, 2016; wherein the builders will have to compulsorily pay interest little more than base rate of home loan interest.

The irony in this case is, the compensation has been indirectly assessed to tax, by way of deduction from rebate on home loan interest.


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