Cancelled under-construction flat & received refund with some interest: what is tax treatment?
Hi,
I had booked a flat in the year 2015 and signed sale agreement after paying 20% of sale value.
Later gone with home loan for the remaining 80% of sale value.
Based on construction progress, had disbursed 3 payment installments to the builder via bank from the year 2015 to 2017.
But, after that I had to cancel the flat due to major delay in the project, and finally received the refund and with some interest in the financial year 2018-19.
During this period, I had paid the interest to the bank for the 3 installment amounts received and paid to the builder . (for ex: lets say bank interest amount is Rs. 3,00,000)
As I mentioned, I had received some interest amount from the builder, i.e. after deducting 10% TDS
For ex: let’s say
Total interest amount payable by the builder- Rs. 5,00,000
TDS by builder - Rs. 50,000 (I can see this in my Form 26AS report as well)
Interest amount Received - 4,50,000
As I see, whatever interest that I had paid to the bank is kind of cost to me and whatever received from the builder is kind of income.
In this scenario, what would be the income tax treatment………
a. Can I calculate the income tax only based on the difference of interest amounts (i.e. after deducting whatever I had to paid to the bank)?
As per ex: Rs. 5,00,000 – Rs. 3,00,000 = Rs. 2,00,000
b. Do I have to calculate income tax based on the complete amount that I had received from the builder?
As per ex: Rs. 5,00,000
c. Do I have to really consider whatever interest amount paid by the builder to me as income and pay income tax at all?
OR else
d. What would be the right way of treating this scenario for calculating the income tax?
Please suggest.
Asked 6 years ago in Income Tax
