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Taxability of compensation on compulsory acquisition
What is the taxability of compensation received from government on compulsory acquisition of an immovable property not being a part of an industrial undertaking?
Replies (1)
As per the Income Tax Act'1961 the compensation received for compulsory acquisition of immovable property is to be treated as Deemed transfer of Capital Asset, hence chargeable to income tax under the head "Capital Gain".
As per Sec.45(5) of the Act, such compensation will be taxable in the previous year in which it is first received. For the purpose of calculation of capital gain tax, the Full Value of Consideration would be the compensation awarded.
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