In tax on money recievd from govt !! from land acqusition

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Pralay nath

23 Points Posted on 05 September 2025

My father recievd nearly 50 lakh as acqusition compensation for a part of ancetoral land , Which is occupied by govt. for road widening project.

Since land belongs to our family from past so many year ,probably more than 80-90 year from now.

Hence no purchase price or purchase record is available. and my father got land from his father(my grand father)

I want to know Do my father have to pay any sort of tax on this recieved money.. ?? then how much and under which section.

Or renumuration money for land acqusition for govt project is exempted ??

if so then under which section do he need to show that this money is from land acqusition ??

Thanks

Replies (5)

Quick Summary

This discussion explores whether compensation received for ancestral land acquired by the government for a road widening project is subject to tax. The general consensus, supported by CBDT Circular No. 36/2016, is that compensation under the RFCTLARR Act is tax-exempt, provided Section 96 conditions are met. However, there can be complexities with acquisitions under other specific acts like the National Highways Act, where tax implications might vary based on ongoing legal interpretations.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121534 Points Posted on 05 September 2025

The compensation for land acquired under the RFCTLARR Act is tax exempt under most circumstances, except for certain private negotiations or cases governed by other specific acquisition statutes.

The Central Board of Direct Taxes (CBDT) issued Circular No. 36/2016, affirming the exemption applies broadly, including non-agricultural land, provided the conditions of Section 96 are met.

Compensation under the National Highways Act, 1956 or other acts listed in the Fourth Schedule of the RFCTLARR Act has seen mixed interpretations; some tax tribunals have granted exemptions, while others have cited specific government memoranda to hold that Section 96 may not apply.
Ongoing litigation in high courts continues to clarify these nuances, especially for land acquired for highway projects or under other state-specific legislation.
https://www.scconline.com/blog/post/2024/05/10/income-tax-on-compulsory-acquisition-under-the-nhai-act/

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121534 Points Posted on 05 September 2025

https://incometaxindia.gov.in/tutorials/81.tax-treatment-on-compulsory-acquisition-of-land.pdf

Pralay nath

23 Points Posted on 06 September 2025

thank you sir ... I will study those in detail.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121534 Points Posted on 06 September 2025

You are welcome..

Aashok Kumar Sharma

Finance/Compliance Consultant

71173 Points Posted on 06 November 2026

Very likely exempt. The route depends on the land and the law used:

• Acquisition under the RFCTLARR Act, 2013: Sec 96 of that Act exempts compensation from income-tax. CBDT Circular 36/2016 confirms that compensation (including enhanced or interest) for compulsory acquisition under RFCTLARR is not taxable, unless the agreement route under Sec 46 applies.

• National Highways Act acquisitions (common for road widening): from 1 January 2015, RFCTLARR compensation provisions apply to NH Act acquisitions through the Fourth Schedule (Sec 105), and tribunals have extended the Sec 96 exemption to them.

• Rural agricultural land: not a capital asset at all, so no tax.

• Urban agricultural land: Sec 10(37) exempts compensation to an individual or HUF if the land was used for agriculture by them or their parents for 2 years before acquisition.

• Ancestral (inherited) land: the cost is the previous owner's cost or FMV as on 1 April 2001, if any computation is needed.

• Interest on delayed compensation (Sec 28 of the LA Act) is taxable as income from other sources with a 50% deduction (Sec 56(2)(viii), 57(iv)), unless it is part of RFCTLARR compensation, which is exempt.

• Report the exempt compensation in Schedule EI with the acquisition order.