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I had booked a residential flat that was to be ...

I had booked a residential flat that was to be delivered in 2016 but was delivered in 2017. In an...

I had booked a residential flat that was to be delivered in 2016 but was delivered in 2017. In an out of court settlement, the builder has agreed to give me an amount as penalty for the delay. This amount is more than the penalty stipulated in the builder buyer agreement. Will this amount attract income tax? Thanks in advance.

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Chiranjibi Chapagain Jun. 08, 2018

As far as I can see from your arguments, you have two options

1. Considering the amount received as a capital receipt and reducing it from your cost of acquisition of the flat.

2. Considering the amount received as a revenue receipt and paying taxes accordingly as Other Sources income.

Approach 1 will reduce your Cost of acquisition and thereby increase your capital gains if you sell this property later in future, following this approach is advisable.

However, if you wish to follow approach 1, make sure you get a statement from the builder clearly stating such payments made by him to you and arriving at the final cost of acquisition to you.

I had booked a residential flat that was to be delivered in 2016 but was delivered in 2017. In an out of court settlement, the builder has agreed to give me an amount as penalty for the delay. This amount is more than the penalty stipulated in the builder buyer agreement. Will this amount attract income tax? Thanks in advance.

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