Taxability of compensation paid for land acquisition

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Compensation received for land compulsorily acquired by the government, even for urban non-agricultural properties for road widening, is generally tax-exempt. This is clarified by Ministry of Finance Circular No. 36/2016 under the Income Tax Act and the RFCTLAAR Act, 2013. You should still declare this compensation as exempt income in your tax returns. Officials should provide details of the acquisition act and section upon request.

Clarifier

Clarifier (Querist)
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11 May 2020 Dear CAClub

Facts:

1. My property located at Hyderabad has been acquired by GHMC (greater hyderabad munical corporation ) for road widening and demolished.

2. Compensation has already been paid.

Question:

1. is the compensation paid by government in the above taxable ?

2. Which specific provision of income tax act deal with this subject matter ?

2. Do I have to declare it my tax returns ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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12 May 2020 1 Not taxable it's exempted.
2 The Ministry of Finance vide Circular No. 36/2016 has cleared a cloud of doubt clarifying the issue if compensation received for compulsory acquisition of land is exempt under Income Tax Act as well as Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLAAR Act).
3 Show it in exempt income schedule of ITR.

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Clarifier

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12 May 2020 Thank you Mr.CA R SEETHARAMAN for your valuable time and reply. One question though.

My property which has been acquired for road widening is located in an urban area in the limits of greater hyderabad municipal limits and is non agricultural. Is the compensation still tax exempted ?

Clarifier

Clarifier (Querist)
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12 May 2020 The notice received for acquiring the property does not have any details as to under which ACT and section the property has been acquired by the government and whether the acquisition for road widening is under a state act or central act. How can we get to know all these details ? Are the GHMC officials supposed to provide an order copy along with notice ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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12 May 2020 1 yes it's still exempt.
2 yes the official supposed to give the details.

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