Interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year (after reducing standard deduction @ 50% of income as per S. 57(iv) of the Income Tax Act, 1961 in which it is received. Such interest shall be taxable under the head ‘Income from Other Sources’ as per S. 56(2)(viii).
As Per Section 145A(b), of the Income Tax Act, 1961-
Method of accounting in certain cases.
Notwithstanding anything to the contrary contained in section 145,—
(a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head “Profits and gains of business or profession” shall be—
(i) in accordance with the method of accounting regularly employed by the assessee; and
(ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation.
Explanation.—For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment;
(b) Interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received.