Manish
The amount is fully taxable. It is advisable to get the interest in the relationship if the ownership of holding. Otherwise there will be heavy burden of tax in one file
Tax on Interest received on cancellation of property
Hi, I signed an MOU with a builder in Jul2012, for a plot under a township scheme in Pune. The MOU that we signed included full payment at that time, with a provision of interest at a predefined % rate compounded quarterly if the builder failed to give possession of the plot within 48 months (he also needed to get the Township clearance by then). Please note that no registration was done, since the Township wasnt approved at that time (and isnt still), it was just an MOU. Now, the 48 months have lapsed and the builder has agreed to pay the amount back with agreed interest, but is insisting on a 10% TDS deduction on the interest amount. I want to know whether this amount is taxable or not. Thanks, Manish
Asked 7 years ago in Income Tax
Yes interest part is taxable under the head income from other sources and TDS deduction of 10% under section 194A is right
You have to club this income in your taxable income and claim TdS accordingly
Dear Manish,
The amount is taxable in your hands and TDS deduction is also correct. You will get the credit of TDS paid while calculating your tax liability.
Please feel free to call/revert in case you need any further assistance.
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Thanks Vidya, Lalit and Abhishek for your prompt responses. So, essentially i will actually have to pay 30% tax (my slab) on this as part of my returns filing. And to answer your question Vidya, in the MOU, my wife and myself both signed as purchasers. So, i hope that the interest and tax can also be split between the two of us? Please advise.
Asked 7 years ago
Yaa correct sir. Just tell them.explicitly this to the builder. Otherwise they don't care and make entire payment and tax in 1st purchaser.
Right
You can split interest as per share in property
TDS will be applicable on the interest payment.
You can split the amount amongst yourself and your wife in the same way in which the amount was paid by you at the time of signing of the MoU. Otherwise, there may be scope for clubbing of income. The clubbing will be applicable on the interest amount, if there is no adequate source for your wife to make the payment at the time of MoU.
Once again, thank you so much. Actually the initial payment was made by me from my cheque only. So, is it still possible to get tax benefit by splitting the interest? Also, do i need to get the cheque from builder in a split manner, or i can get it and make a transfer to my wife's account. asking because knowing the builders, i would rather take what he has already prepared, rather than asking him to arrange for another set of cheques.
Asked 7 years ago
How much is the interest amount
Dear Manish,
Since the money has been given by you, you can't split the interest income with your wife.
Please feel free to call/revert in case you need any further assistance.
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Sir
You have to take interest from builders. And not transferring the amount between yourself.
Sir in your case it will be treated as Interest on Loan and taxed in Income from other sources.
If the amount was given by you and your wife then the interest will be divided in the proportion of the loan given. But need to check how the builder will pay the interest and pay TDS. If he pays interest and TDS on your PAN then you need to declare that. So you need to intimate the Builder before hand regarding payment of Interest and TDS.
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