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\circular no 36/2016 ans sec 194la of income tax act

Shivani Mittal (Practice) (425 Points)

28 October 2016

As per Circular No 36/2016, any immovable property compulsarily acquired under RFCTLAAR Act is exempt from income tax act. It absolves the receiver of sum from income tax liability. On the contrary, Sec 194LA states that "any sum" awarded as compensation will be liable for tax deduction.

Now, lets say Mr A's land was compusarily acquired by GOI. Such compensation is exempt from income tax by virtue of Circular no 36/2016 in the hands of Mr A. Now the question is that will GOI still be liable to deduct TDS u/s 194LA on such compensation awarded.

Request you to opine asap.

Regards

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11 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 29 October 2016

Circular No. 36 of 2016

"2. The RFCTLARR Act which came into effect from 1st January, 2014, in section 96, inter alia provides that income-tax shall not be levied on any award or agreement made [except those made under section 46) under the RFCTLARR Act Therefore, compensation received for compulsory acquisition of land under the RFCTLARR Act (except those made under section 46 of RFCTLARR Act), is exempted from the levy of income-tax."

So, No TDS u/s. 194LA shall be deducted, for any compensation/s paid for any acquisition under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 ('RFCTLAAR Act')

(Guest)

as assessee has recd compensation from Govt of 200000 on 30/7/16 (before the circular) TDS u/s 194LA has been deducted.

Will it be taxable?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 27 July 2017

The circular is just clarification for applicability of the act even over non-agricultural land......

".........This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land. The matter has been examined by the Board and it is hereby clarified that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of Income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961.............."

The effective date remains same as previously enacted under the act......

(Guest)

Thank You

1 Like

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 29 July 2017

Most Welcome

PARAS CHHAJED (CA Practice ) (942 Points)
Replied 27 January 2018

With the new enactment on compulsory acquisition and comepnsation section 96 of RFCTLARR Act, 2013 applicable w.e.f. 01.01.2014, provides for exemption to all land acquisitons irrespective of location and ctegory (Agricultural or Non Agricultural) of land, status of assessee, period of holding etc. thereby making every compensation for compulsory acqusition of land by any government for public purposes. Thus it is a blanket exemption.. Section 10(37) of Income Tax Act was applicable only to Individuals and HUFs and for Agricultural Land only subject to certain conditions. Once the income itself is exempt there should be no question of any TDS. the new Act is a specific Act and prevails over the provisions of Income Tax Act. Views of other members solicited.

(Guest)

The Ministry of Finance vide Circular No. 36/2016 has clarified that compensations for compulsory acquisition for which RFCTLAAR Act 2013 applies (except section 46) will be exempted from income tax. Section 194LA also has been amended accordingly so that no TDS is deducted on such compensations.

[Provided further that no deduction shall be made under this section where such payment is made in respect of any award or agreement which has been exempted from levy of income-tax under section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013).]Ins. by Act No. 7 of 2017 (w.e.f. 1-4-2017).

My query is whether the RFCTLAAR act applies to all compulsory acquisitions by Govt in India (Except J and K)?

This was my query is Experts section. No replies yet.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 06 February 2018

"My query is whether the RFCTLAAR act applies to all compulsory acquisitions by Govt in India (Except J and K)?"

1. The Land Acquisition Act, 1894 will continue to apply in certain cases, when an award has been made under it. The 2013 Act will apply in case an award has been made five years prior to the commencement of the 2013 Act but the physical possession of the land has not been taken or compensation has not been paid.

2. Public purpose ::: The Bill amends the Act to include acquisition of land for private hospitals and private educational institutions within the definition of public purpose.

The amendments (amendment 2015) remove this provision of the Bill. This implies that acquisition of land for private hospitals and private educational institutions is no longer included within the definition public purpose.

3. For more details refer: indiacode/acts-in-pdf/302013.

PARAS CHHAJED (CA Practice ) (942 Points)
Replied 06 February 2018

Any acquisition by any State Government of Central Government for public purpose shall be exempt from Income Tax irrespective of location and category of land.

Sreejith (Student CA IPC / IPCC) (24 Points)
Replied 12 April 2018

My land was acquired by government under section 96 of RFCTLAAR act. But unfortunately they deduct tds under section 194 LA and deposited to Government. Since there is no specific section to claim tax exemption under IT act, in which section I can claim tax exemption for refunding the tds amount..