The corpus received by members from builders could be treated as a capital receipt, received on account of the hardships caused to the them on redevelopment and thus, not taxable as income of the assessee unless specifically provided by the Income Tax Act. However, such receipts should be reduced from the cost of acquisition of the property while computing capital gains on transfer. Further, rentals received from the builder may be considered as reimbursement of rental expenditure incurred by the member of society and thus not chargeable to tax. Any rent received as corpus will also be exempt from taxation, however, any increase in the amount of corpus would lead to reduction in the cost of acquisition of the property while computing the capital gain upon transfer. Whereas, if the amount received from builder is in excess of the actual rent paid, such excess shall be taxed as the income from other sources at the slab rates.
Please note that the taxability of corpus received by member of a society is subject to two views and, hence, is not free from litigation. The tax officer may also take a contrary position that such receipts are taxable in the hands of the member as a consideration for exchange of old property with the new one and, hence, liable to tax.
In the absence of exact facts of the case, please note that our answer is based on limited understanding as provided in your question. You may consider approaching a consultant with all the necessary information to seek a detailed technical advice on your matter.
The writer is director, Nangia Advisors LLP