Hi,
Hope you are doing well !
No, it is not your income.
It is a capital receipt. You do not need to pay tax on the same.
India - pre-EMI interest paid by builder need to be taxed?
Dear sir / Madam , My name is Annamalai . I have booked flat in Mantri Webcity , Bangalore , India in 20th April 2014 .Total cost of the flat INR 6,344,675. I paid 20% as my own contribution which is 1,268,935 and balance 80% loan from PNB Housing finance for INR 4,902,223. I bought this under Pre- Emi & buy back scheme . This is like special package and promotion scheme . Mantri will pay the EMI until march 2017 ( 3 years ) . (Every month Mantri pay 43,000 INR to my bank account and I pay this money to PNB finance) . After 3 years Mantri suppose to pay equal contribution ( 1,268,935 ) as my own contribution if I decide to return in March 2017 . But Mantri defaulted to honor this commitment which I have taken this case with RERA . Now my question is do I need to show amount which Mantri paying me pre emi amount as my taxable income for my tax calculation ? The reason is I am staying in Hong Kong . NRI . My Indian income which is rental from one of my apartment and bank interest is less than 2.5 lakhs . Hence I did not file return . If I need to consider Mantri EMI as my taxable income then I need to file my return . Hence I needed your suggestion and advice .
Asked 6 years ago in Income Tax
Hi,
- There should be an agreement supporting this transaction as Mantri was financing you. According to bank statements, EMI figures should reconciled. In that scenario it will not be taxable income.
Thanks
Hi,
This will not be treated as your income and hence there is no tax liability.
Regards,
Nikhil.
Hi,
It will be treated as capital receipt. You will not be liable to pay any tax on it.
You will not be required to show the same in ITR.
However, please keep the supporting documents for future.
Hi,
Subject to the proper documentation in place, this income will not be taxed in your hands. It can be claimed as capital receipt.
Yours is a very unusual case. The analysis can be different depending on how it is perceived by different tax experts. Also, as multiple views are possible, litigation with Income-tax department cannot be ruled.
There are multiple possibilities on taxability. I understand that the house is owned by you since 2014 as you have made the full payments. It was only that Mantri was disbursing you towards the loan installments. I foresee these possibilities :
1. The actual cost of the house for you in only to the extent of the funds actually contributed by you.. hence in future in case of sale the cost of house would be 1,268,935 + to be paid by you without assistance from Mantri
2. IF the funds are allocated towards the house for EMI ie your obligation met by someone else, it should be treated as mere diverting income. Hence, the funds received by you should be treated as income. Since, Mantri has defaulted now and you cannot forecast this earlier, the entire receipt may be offered to tax in this year.
3. As the funds are towards capital asset, it being a capital receipt need not be offered to tax. However, the cost of asset for you would only be reduced amount met by you.
Well in my view (ONLY FROM PRACTICAL Perspective) I understand that the amount paid by MANtri did not have any tax deduction and hence no records in 26AS. Hence, limited chance to undergo assessment where no return is filed. As and when you decide to sell the flat the cost can be analyzed for computing capital gains. IT would depend on the agreement entered into between MANtri and you. Having said that and being a very practical situation, it would be worthwhile to analyses the documents in detail and decide the taxability.
Your query is whether you need to show the EMI amount reimbursed to you by builder as income or not?
So many people in many articles say it's a capital receipt and need not be shown as income but I would like to say that if you are saying it as reimbursement of your EMI then you need to show it as income because in future you will claim this house loan as your expense under section 24 and 80C and if you won't show it as income now you won't be able to claim it as expense then because then it would be double benefit because to claim anything as expense it need to be paid out of your income. So I think it would be better if you show it as income.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you
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