Tax Labiality on UPRERA Refund

Income Tax Income from House Property
1

Hi Team,

I had filed a case against the builder in UPRERA for a refund of the amount with interest, as possession was delayed beyond the committed date. After 5 years of legal proceedings, we won the case, and the principal + interest was refunded to my and my wife’s bank accounts (50% each of the total amount).

As per my understanding, I need to pay tax on the interest income received.

I would like to confirm if the following can be adjusted or claimed while calculating the taxable interest income:

  • Interest paid to the bank on the home loan

  • Legal fees

  • Rent paid while the case was in court

  • Other related expenses, if applicable

Please let me know if my understanding is correct or if any further details are required from my side.

Thanks for the support.

Best,
Alok

2

Hello @Alok_Singh,

Only the expenses that are wholly and exclusively incurred for earning the interest income are allowed as expenses.

So, in you case, only the legal fees can be claimed against the interest income. Other expenses, like home loan interest or rent paid during the proceedings are considered secondary expenses and cannot be deducted.

Hope this helps!

3

Hi Diti,

Thanks for your reply.

Could you please suggest if there are any legal and compliant ways to reduce tax liability or pay the lowest possible tax on interest income?
I will also check with a Quicko tax consultant in parallel if any optimized tax planning option is available.

Thanks again for your support.

Best,
Alok

4

Hey there,

You can claim deductions like life insurance premium, health insurance premium, etc. under chapter VI-A and you can also pitch ask an expert here!

Hope this helps!