Yes, you have to pay income tax on this interest component.
It can be reported as taxable under the head of other sources or capital gain.
Since you will be under the 30% tax bracket, it will benefit you if you report under capital gain, where the tax rate will be 20% on Long Term capital gain with indexation benefit.
The definition of capital asset also includes extinguishing any rights in a capital asset. At the time of booking, the buyer acquires a right into the flat. When the buyer refunds the amount with interest, he extinguishes his right. Thus the sales proceeds, including interest income, so received less indexed cost of acquisition, can be treated as capital gain in your hands.
The entire 10 Lakhs will be taxed if you opt for other sources. Here you can take deduction u/sc 57, which provides 50% of the conclusion on compensation. Also, if you have taken any loan to pay that booking amount to the builder, you can claim that interest amount paid as a deduction from this 10 Lacs.
You can choose whichever method gives you the best tax savings.
If you find the answer helpful, please give 5-star ratings.