Taxability of Proceeds received upon surrender of Unauthorized Possession of Land

In my view, the ₹40 lakh received by the person in unauthorised possession will be taxable. If he had a possessory/right-to-occupy claim and the payment was made for surrendering/vacating such right, it can be treated as consideration for relinquishment/extinguishment of rights in land and taxable under Capital Gains, subject to facts. If the right was held for more than the prescribed long-term period, LTCG treatment and section 54F exemption may be examined, provided all conditions are satisfied. However, if there was no legally recognisable right and the payment was merely a settlement amount for vacating, the department may tax it as Income from Other Sources. TDS under section 194IA does not itself decide the head of income; it only gives TDS credit to the recipient.