NOVELTY - Preparing iloperidone substantially free from one or more or its impurities, comprises (a) reacting 6-flouro-3-(4-piperidinyl)-1,2-benzisoxazole (FBIP) or its salt and a 1-(4-(3-substituted propoxy)-3-methoxyphenyl)ethanone compound (ILK-I) in presence of an organic base and optionally in presence of phase transfer catalyst to obtain iloperidone, (b) converting iloperidone to its acid addition salts, and (c) neutralizing iloperidone acid addition salts with a base to obtain iloperidone substantially free from one or more of its impurities.    USE - Iloperidone is useful as an antipsychotic agent. No biological data given.    ADVANTAGE - The process provides iloperidone, which is substantially free from impurities and is easily scalable, for industrial use. The iloperidone obtained by the process is crystalline. The process is simple, cost-effective, ecofriendly and commercially available.    DETAILED DESCRIPTION - Preparing iloperidone substantially free from one or more or its impurities, comprises (a) reacting 6-flouro-3-(4-piperidinyl)-1,2-benzisoxazole (FBIP) or its salt and a 1-(4-(3-substituted propoxy)-3-methoxyphenyl)ethanone compound of formula (ILK-I) in presence of an organic base and optionally in presence of phase transfer catalyst to obtain iloperidone, (b) converting iloperidone to its acid addition salts, and (c) neutralizing iloperidone acid addition salts with a base to obtain iloperidone substantially free from one or more of its impurities, where the acid addition salts are hydrochloride, hydrobromide, hydrogen sulfate, phosphate, nitrate, citrate, acetate, succinate, fumarate, oxalate, maleate, salicylate, malate, besylate, mesylate, tosylate, napsylate and tartarate.    X = leaving group comprising chlorine, bromine, fluorine, iodine, mesylate or tosylate.    INDEPENDENT CLAIMS are included for:    (1) a dimer impurity of iloperidone comprising 1-(4-(3-(4-(6-(4-(6-fluoro-benzo(d)isoxazol-3-yl)-piperidin-1-yl)-benzo(d)isoxazol-3-yl)-piperidin-1-yl)-propoxy)-3-methoxy-phenyl)-ethanone (B);    (2) salts of iloperidone with suitable acids comprising hydrochloride, hydrobromide, hydrogen sulfate, phosphate, nitrate, citrate, acetate, succinate, fumarate, oxalate, maleate, salicylate, malate, besylate, mesylate, tosylate, napsylate and tartarate;    (3) crystalline salts of iloperidone comprising hydrochloride, hydrogen sulfate, iloperidone phosphate, iloperidone citrate, iloperidone acetate, iloperidone nitrate, iloperidone succinate, iloperidone maleate, iloperidone fumarate, iloperidone oxalate and iloperidone salicylate characterized by having at least X-ray powder diffraction with characteristic peaks at 2-theta and/or X-ray powder diffraction pattern having peaks as given in the specification;    (4) preparing iloperidone or its salts comprising reacting FBIP or its salt and (ILK-I) in presence of an organic base optionally in presence of phase transfer catalyst;    (5) preparing iloperidone substantially free from dimer impurity (B), comprising (a1) reacting 2,4-diflourophenylpiperidin-4-yl methanone (VI) or its salt with hydroxylamine hydrochloride in presence of a base to obtain an oxime compound (V) or its salt, (b1) neutralizing (V) with a base to obtain oxime free base, (c1) reacting oxime free base with a base in one or more organic solvent to obtain FBIP, and (d1) reacting FBIP or its salt and 1-(4-(3-chloropropoxy)-3-methoxyphenyl)ethanone (ILK-Ia) in the presence of an organic base to obtain iloperidone substantially free from the dimer impurity (B);    (6) purifying iloperidone comprising either (a2) suspending iloperidone in one or more of suitable organic solvent, heating to allow complete dissolution and obtaining iloperidone substantially free from one or more of its impurities, or (a3) combining suspension of iloperidone in one or more solvent with an anti-solvent to obtain iloperidone substantially free from N-oxide and desflouro impurities, or (a4) slurrying iloperidone in one or more organic solvent to obtain iloperidone substantially free from N-oxide and desflouro impurities, or (a5) providing a iloperidone solution containing more than 0.1% of N-oxide or desflouro impurities or more than 2% of total impurities, mixing the solution with finely powdered carbon and filtering the mixture to obtain pure iloperidone substantially free from N-oxide or desflouro impurities and other impurities;    (7) preparing iloperidone or its salts comprising (aa) suspending iloperidone in an organic solvent, (bb) adding an acid, and (cc) recovering iloperidone salt from the suspension; and    (8) preparing (ILK-Ia), comprising (i) reacting 4-hydroxy-3-methoxy acetophenone and 1-bromo-3-chloropropane in one or more of first organic solvent in presence of base to obtain reaction mixture, (ii) heating the reaction mixture, (iii) concentrating the reaction mixture to obtain residue, and (iv) treating the residue with second organic solvent to obtain (ILK-Ia).