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Interest receieved on immovable property by Govt. compusory acquisition

nikhil (ca) (221 Points)

05 September 2018

Whether Interest recieved on immovable property by Govt. compusory acquisition is taxable under income tax. Any exemption if any. How to reduce tax if taxable.
Please note interest is received on original compensation not due to enhanced compensation.

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6 Replies

mohit rathi (student) (42 Points)
Replied 05 September 2018

if the capital gain was exempt on such compulsory acquisition than any interest received on such compensation is also exempt. this is view taken by Guj. high court in a case

nikhil (ca) (221 Points)
Replied 05 September 2018

capital gain is exempt only in case in rural agriculture & not in urban agriculture land. in my case it is latter one.

RATAN (STUDENT) (130 Points)
Replied 05 September 2018

though there is no specific provisions in the Income-tax Act regarding that provides exemption on compulsory acquisition of urban agriculture land but after new land acquisition Act there is no capital gains (subject to certain conditions) on compulsory acquisition of urban lands also.. but as far as the interest component is concerned, it is taxable under the head income from other sources.

mohit rathi (student) (42 Points)
Replied 06 September 2018

You should refer to section 10(37).

Ashwin Kumar (CA ipcc) (447 Points)
Replied 06 September 2018

if the payment exceeds for cumpolsory acquisition above 250000, then tds under section 194 LA should be made and the interest recieved on it will be taxed as income from other sources. however incase of agricultural land there is no tax on compensation recieved however still interest recieved on it is taxable under income from other sources.

mohit rathi (student) (42 Points)
Replied 06 September 2018

Interest component of enhanced compensation is taxable under income from other sources and a straight deduction of 50% is allowed on such int. Further you should also refer to Gujrat High Court judgement in MOVALIA BHIKUBHAI BALABHAI v/s ITO