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Income tax on compensation on land acquisition

anup kumar (Contractor) (66 Points)

22 February 2016

My father is a farmer and his rural agriculture land was acquired by Haryana Govt and he got compensation approx Rs 10 lakh in year 2010 and then fought for less compensation of land in supreme court and win the case and he again got Rs 7 lakh in FY 14-15 as extra compensation and on which Hryana development authority deducted 10% tax Rs 70000 approx. So, is it refundable or not? and if yes then how can i take it back from income tax deptt. how can i file ITR of my father?

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4 Replies

CA GOKUL RAJ R (Chartered Accountant) (151 Points)
Replied 22 February 2016

Dear Anup Kumar,

Rural Agricultural land is not a capital asset as per Section 2(14)(iii) of Income tax act, 1961.

So this compulsory acquision is not taxable. The enhanced compensation is also not taxable. however the interest on enhanced compensation received if any, then that will be offerred as income from other sources.

As the Govt has deducted TDS @ 10%, it seems that your father has his PAN. So, First ensure that your father's income (other than agricultural income but including interest income) doesnot exceed the maximum amount which is not chargeable to tax (Rs. 3.2 lakhs in case of your father is a senior citizen),.

If yes, well you can file ITR-1 (In case of agricultural income doesnot exceed Rs.5000/-) or ITR-2 in case of agricultural income exceeds Rs5000/- for AY 2015-16 and claim the refund of entire tds.

Before filing the return of income, check with Form 26AS whether the tds has been credited in that FY or not. You can well get the refund amount

Thanks

CA Gokul Raj

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anup kumar (Contractor) (66 Points)
Replied 22 February 2016

yes he has PAN and the compensation that he got is not interest and also amt is showing in 26AS.So how can i file ITR2. Means how i show that income and claim refund.

CA GOKUL RAJ R (Chartered Accountant) (151 Points)
Replied 22 February 2016

Show the enhanced compensation amount in exempted income column. and show the agricultural income in agricultural income column. taxable income shall be NIL. and fill the TDS amount and TAN carefully as per the 26AS. Mention your father's savings Bank account towhich the refund has to be credited. File the form electronically.

PARAS CHHAJED (CA Practice ) (1025 Points)
Replied 26 January 2018

Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 provides for exemption form income tax for all compensation agaisnt compulsory acquisition of land whether rural or urban and whther agricutural or non-agricultural to all asasseess irrespective of status whereas s. 10(37) of Income Tax Act, 1961 provided for exemption to Individuals and HUFs only for agricultural land. This provision is a pecial provision.