Gopal (Senior Consultant) (34 Points)
21 February 2014Hi,
In the real estate business, if the builder is paying compensation to the customer for cancellation of booking due to a fault from the bulder's side, is this amount liable for TDS deduction? For eg. - Builder decides to pay interest @ 12% on the booking amount received from the customer along with the refund of booking amount. In this case, is this amount liable for deduction of TDS?
Please help me with the relevant case law, if any or necessary section under the act.
Thanks in advance.
Mihir
(Wealth Manager)
(5293 Points)
Replied 22 February 2014
Returning the booking amount is not an income. But interest of 12% on the booking amount is taxable under the head income from other sources, and the builder may deduct TDS u/s 194A at 10%.
Z
(Tax Consultation (US and India))
(2965 Points)
Replied 22 February 2014
Hello Mr. Mihir can you please explain why tax is to be deducted in this case?
Though in this case real estate developer is categorizing it as interest but this is indeed a compensation and in my limited knowledge there is no provision to deduct tax at source in this situation
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