12 October 2021
The Central Board of Direct Tax vide the Circular No.36/2016 dated 25.08.2016 came out with a clarification that the exemption provided under Section 96 of the RFCTLARR Act is wider in scope than the tax-exemption provided under the existing provisions of Income-tax Act, 1961. Hence, compensation received in respect of non agricultural land 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
Therefore, the consideration received from compulsory acquisition of land will be exempt in Income tax.
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