Dear Anil. In a city like Mumbai when a building goes for redevelopment the existing tenants either get another house for their existing homes or gets remunerated by the developer based on current market value. How is such remuneration taxed? Where can one find more information about such tax issues related to redevelopment scenarios? Regards

Ans: As per the provision of the Income Tax Act, in case owner of residential property, transfer said building for the redevelopment project and because of said transfer, any capital gains arising to those individuals, such gains would be taxable in the year in which the competent authorities issue a certificate of completion for such project. However, in case where the said individual transfer his share in the redevelopment project i.e. transfer the building before the said completion certificate is issue, the capital gains shall be taxable in the year in which the transfer takes place and the above provision of the act would not be applicable.Therefore, if Mr. Prasanna D does not transfer his share in the redevelopment project till the date of issue of completion certificate, then the above provision of the act applied and tax required to be paid in the year when completion certificate is received. However, if Mr. Prasanna D get remunerated from developer it seems that Mr. Prasanna D selling his share in redevelopment project before issue of completion certificate and therefore the tax require to be paid in the year when he actually entered into the agreement with developer.And for the purpose of calculation of capital gains, the stamp duty value (SDV) of the building as on date of issue of completion certificate, pertaining to the owner’s share in the redevelopment project or any remuneration received shall be taken into account and tax require to be paid on such gain arising to Mr. Prasanna D.

Ans: Tenancy right is a capital asset and gain earned on transfer of capital asset is usually chargeable under head Income from capital gain.

Ans: Yes matter is still litigative. There are certain Judgments in which it was held that Compensation paid by builder during redevelopment of flats is capital receipt and not taxable. Considering amount of compensation you have received and cost of litigation, in my view, you should offer the said compensation to tax as Income from other sources which will taxed at slab rate.