Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

Interest on enhanced compensation

05 October 2019

Section 57(IV) read along with Section 56(2)(viii) tells us that interest on compensation or enhanced compensation is taxable u/h other sources and same is provided as 50% deduction.
is this interest on compensation or enhanced compensation of acquisition of urban land Or rural land or urban agricultural land or rural agricultural land ???

Reply
Follow
Share

4 Replies

mukesh verma (ca) (6 Points)
Replied 05 October 2019

Rural agricultural land is not a capital assets hence not taxable
Transfer of Urban agricultural land is exempted as per section 10(37)
Transfer of remaining land is taxable

Upgrade to CAclubindia Pro. Subscribe Now!

harshit mehta (88 Points)
Replied 05 October 2019

What about interest received on compensation of rural agriculture land??

Kapadia Pravin (17259 Points)
Replied 07 October 2019

@ Mukesh

Section 10(37) : An individual or Hindu Undivided Family (HUF) can claim exemption in respect of capital gain arising on transfer of agricultural land situated in an urban area...... by way of compulsory acquisition. ... ........This exemption is available if individual or HUF was owner of such land as on 02-06-2014.

Suresh Thiyagarajan (Student) (3986 Points)
Replied 08 October 2019

1. The definition for the purpose of agriculture land is given in sec 2(14)(iii)(a)/(b) along with an explanation. If it falls under that definition, then the same will be covered u/s 10(37).
2. It does not matter whether the same is rural or urban agriculture land as long as it is covered u/s 2(14)(iii)(a)/(b) for claiming exemption u/s 10(37).
3. If it does not fall under the above section then as mentioned by you it will be taxable under sec 56(2)(viii) and deductions u/s 57(iv) to the extent of 50% of the amount of interest on compensation received will be available.
Please correct me if the above solution has an alternative view.