Interest on enhanced compensation on compulsory acquisition

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 July 2012 Is interest received on enhanced compensation under compulsory acquisition of RURAL agricultural land is liable to tax if not then under which section.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

29 July 2012 Not exempt from income tax under section 10(1) of the Income Tax Act,1961 as agricultural income being neither rent nor revenue derived from land used for agricultural purposes. Therefore, taxable under 'income from other sources' subject to deduction u/s 57(iv) of the said act.

Querist : Anonymous

Querist : Anonymous (Querist)

29 July 2012 its rural agricultural land

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

05 August 2012 Interest received is treated as income vide Section 56(2)(viii). In case of rural lands capital gains do not arise. But if you earn interest by investing the proceeds, it becomes taxable income.
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As pointed out by the expert you can claim 50% interest amount as deduction.
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