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Tax on land acquisition

obeid (learner) (292 Points)

14 August 2018

Goverment has taken a land in 2017 and deducted TDS U/s 194LA

it was purchased in 1997 as agriculture land outside the city limit. Now due to expansion it has become residential land.

Is this sale to be treated as cpital gains or exempt income please clarify?

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177741 Points)
Replied 14 August 2018

CBDT issues clarification regarding taxability of compensation received by land owners towards land acquired under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (‘RFCTLARR’); States that Sec. 10(37) of the IT Act provides for exemption of compensation received on compulsory acquisition of an agricultural land, subject to fulfilment of certain conditions; Also takes note of Sec. 96 of the RFCTLARR Act which provides that compensation received for compulsory acquisition of land under the RFCTLARR Act (except for those made u/s 46 therein) is exempt from the levy of income-tax; Given that no demarcation is made between compensation received for compulsory acquisition of agricultural and non-agricultural land in Sec. 96 of the RFCTLARR Act, CBDT clarifies that the scope of exemption provided in Sec. 96 is wider than tax-exemption provided under IT Act; Thus with a view to address the uncertainty regarding taxability of compensation received on compulsory acquisition of non-agricultural land, CBDT now extends the exemption available in Sec. 96 of the RFCTLARR Act to non-agricultural land “even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961”:

cbdt-circular-36-2016-dt-25-oct-2016-compulsory-acquisition-of-non-agricultural-land-tax-free-under-new-land-acquisition-act

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