Taxability of enhanced compensation & interest thereon

Sir, Agricultural land within the limit of corporation area was acquired in 2002. The reference court sanctioned enhanced compensation (Rs 35 lacs) and Interest on it Rs 70 Lacs Issue: 1) Rs 35 lacs to be considered u/s 10(37) or Under capital gain? 2) Rs 70 Lacs to be considered under other income u/s 56 (Viii) or again it should be under capital gain. Can any one guide on above pl DDD
Replies (7)

Compensation enhanced by court deemed to be the income chargeable under the head 'Capital Gains' of the previous year in which such amount is received by the assessee

Interest on enhanced compensation Is also taxable under other sources.

This is what i know as per my knowledge

Now again, if the land sold was an agricultural land and used for agricultural purposes then it will be exempt under the Income Tax Act.

But if the land is not covered under the definition of Agricultural Land, then the whole of the enhanced compensation shall be chargeable to tax.

Thanks Mr Moorthy,

1) If interest is to take as other income , in that case, can we take deduction U/s 57 (iv)

As far as i can recollect you can claim 50% deduction u/s 57.

I would suggest you go through Section 56(2)(viii) for better understanding.

Thanks, following is the conclusion and final call 1. If land does not fit to the definition of agricultural land - it will be capital gain else exempt u/s 10 (37) 2. Interest to be take as other income in the year of receipt and deduction 50% is available u/s as you said in above post Thanks

Your Welcome

I have a question regarding enhanced compensation on compulsory acquisition of agriculture land.  I received Rs 3959715 as enhanced value of sale of agriculture land.  TDS Rs 467963 was deducted.  Please advice if amount Rs 3959715 is taxable or not.  

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