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Compensation of compulsory acquisition

Miss D (student) (114 Points)

04 June 2015

How do I file ITR for compensation received on compulsory acquisition of Land ?

I have received Rs. 4,20,000 compensation on which TDS u/s 194 LA amounting to Rs. 43,260 has been dedcuted. Net amount Rs. 3,76,740 has been credited to my bank account.

This is with respect to FY 2013-14.

Now my doubts are :

1. I dont have any other source of income. Which ITR should I use to file this income?

2. How much refund will I get?

3. Under which head should I file this income?

4. Is it exempt income?

5. When will I get refund?

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7 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 04 June 2015

If such land is urban agricultural land (with satisfaction of certain conditions) then the capital gain (ST/LT) is exempt from tax u/s 10(37)
If not, gain is taxable under the Capital Gains.
You can use ITR2
In order to calculate the refund, cost of acquisition, date of acquisition etc are required
Last date tile return is 31st March 2016 (provided assessment is not over)

Miss D (student) (114 Points)
Replied 04 June 2015

Thanks for your reply. But I have more queries :

1. How will I know if the land is urban agricultural land with just the Form 16A ? The land has been taken over by Sriperumbuthur Expansion Unit. That is all the details that I know. The assessee does not even have a xerox copy of the old deed.

2. In ITR 2, under which head should I show this amount?

If I show it under LTCG, then I am forced to show it under 20% tax rate. While, TDS was 10% deducted.

Can I show it under exempt income?

Under which serial number adn head should I show it and how?

CMA Poornima Madhava (CMA) (13097 Points)
Replied 04 June 2015

https://www.incometaxindia.gov.in/Pages/utilities/Agriculture-Land-in-Urban-area2014.aspx : utility to find whether the land is urban agricultural area
In ITR2, show the income under the head capital gain
Yeah if it it long term capital asset, then LTCG is taxable @ 20%. TDS deduction is completely different from actual tax liability. When u file return, tax liability is shown as 20% - 10% already deducted and balance is payable.
U can show it as exempt income only if it exempt.

Miss D (student) (114 Points)
Replied 04 June 2015

So, if I show it as LTCG, then can I claim ICA and ICI ?

Do I need to have proof for improvement done before compulsory acquisition?

CMA Poornima Madhava (CMA) (13097 Points)
Replied 04 June 2015

Yeah, if LTCG then ICA/ICI can be claimed.

Regarding proof for COI: /forum/cost-of-improvement-capital-gains-162444.asp#.VXAs_kazmT8

Miss D (student) (114 Points)
Replied 04 June 2015

Thanks a lot. So for Vacant land that was acquired, then cost of improvement would be nil is it?

CMA Poornima Madhava (CMA) (13097 Points)
Replied 04 June 2015

COI is capital expenditure incurred by an assessee in making any additions/improvement to the capital asset. It also includes any expenditure incurred to protect or complete the title to the capital assets or to cure such title. To put it differently, any expenditure incurred to increase the value of the capital asset is treated as cost of improvement.

By the above definition, if no such expenditure was incurred for vacant land, then no COI I think.