Capital Gain on Transfer of Agricultural Land and DRC Certificate

In my view, if the farmer is an Individual/HUF and the agricultural land was used for agricultural purposes for two years preceding acquisition, the amount received on sale of DRC/TDR issued against compulsory acquisition of land for DP Road can be claimed as exempt under section 10(37). The DRC/TDR is only a mode of compensation for compulsory acquisition. However, the claim must be supported by 7/12 extract, crop records, acquisition/DP road documents, DRC allotment letter and sale agreement. If section 10(37) is not accepted, an alternative argument may be examined that TDR/DRC had no ascertainable cost of acquisition, relying on Bombay High Court decision in Sambhaji Nagar Co-op. Hsg. Society, subject to facts.

Thank you Sir for your valuable insights...Capital Gains arise derived from Transferable Development Rights (TDR) or Additional Floor Space Index (FSI) sale in Redevelopment is taxable under the head as Long term capital Gain after 1^st April 2023. As per my view if this amendment is considered to be applicable only to Redevelopment Projects, it will not be applicable to the Lands compulsorily acquired by any Municipal Corporation/ Government. However, if proceeds from Sale of TDR are considered as taxable, can we argue and claim Fair Market Value of Land as on 1.4.2001 as Cost of Acquisition being it ancestral land while computing capital gain? Also whether exemption u/s 54B, 54F and 54EC be claimed against such Capital Gain?

On the stated facts, exemption is arguable but not automatic. The farmer’s receipt is consideration for transferring the DRC/TDR, not necessarily the compensation received on compulsory acquisition of the land. Section 10(37) may exempt capital gain on the acquired land if its conditions are met—including the land being urban agricultural land, agricultural use by the individual or parent for the prescribed period, and compensation being received on compulsory acquisition. It does not, by itself, settle the tax treatment of a later sale of the DRC.

For the DRC sale, the key question is whether the TDR has an ascertainable cost of acquisition. In CIT v. B.C. Srinivasa Setty (128 ITR 294, SC), the Supreme Court held that where the cost of acquisition cannot be computed under the statutory scheme, the capital-gains charge fails. This principle has been applied in some TDR matters, but the outcome depends on the facts and applicable law; it should not be treated as a blanket exemption for every DRC sale. Conversely, if the DRC is treated as a capital asset with a determinable cost—such as cost allocated from the acquired land—capital gains may be taxable.

• Review the acquisition award, DRC terms and transfer deed to establish whether the DRC was issued as compensation and how its cost, if any, is determined.
• Confirm the land’s agricultural use, ownership and acquisition details for Section 10(37); the fact that it lies within TMC limits does not alone establish eligibility.
• The DRC sale value of ₹1.20 crore should be reported consistently with the position adopted, supported by the relevant documents and judicial authority applicable to the facts.

This issue fits into the acquisition-to-DRC transfer workflow, where the compensation, certificate and sale records need to be reconciled. Manual practice work across these documents is difficult; automation reduces repetitive review while professional judgment remains in control. Our platform offers 2,000+ AI agents and 650+ integrations covering only relevant workflows. For a walkthrough, you’re welcome to connect on WhatsApp at https://wa.me/message/3HVOZ7HIY4ESC1.