TDS applicability on compensation paid for crop clearance

Please resolve the following issue.

I had removed the living crop in agricultural land for set up of solar works. But i had not purchased that agricultural land yet, for sure i will acquire it in future.

Now my quesition is whether TDS will be applicable or not on compensation paid to crop loss ?

Replies (6)
Quick Summary
This discussion explores whether Tax Deducted at Source (TDS) is applicable on compensation paid for clearing crops on agricultural land for solar project setup. The core question is whether Section 194LA of the IT Act, typically for immovable property acquisition, applies to crop loss compensation, or if it should be treated as income from agricultural produce, which is usually tax-exempt. Different interpretations exist, with some suggesting TDS under 194LA or 194C, while others argue no TDS should be deducted if treated as a sale of agricultural produce.

Yes, power company would deduct TDS over the compensation paid..

I am Pleased with your reply sir,

Also can i know the provision sir which says TDS should be deducted on such transactions ?

No specific provision, but power companies deduct TDS u/s. 194LA of IT act...

Sir, Sec 194LA of IT act is for compensation or enhanced compensation paid for acquisition of immovable property otherthan agricultural property right sir, here in our query it is agricultural property right sir, so whether this (194LA) will be applicable??

Actually, the crop being agricultural produce, any income arising out of it is tax exempt and hence there should not be any tax deduction. But it has been seen in some cases, tax being deducted u/s. 194LA treating it as compulsory acquisition of immovable property, or u/s. 194C when the same is given as contract to any contractors etc. Hence I asked it under which section TDS has been deducted in your case....

In our case we had treated it as sale of agricultural produce w.r.t to farmer. So that we had not deducted any TDS.

Regarding this i got a doubt whether our treatment is correct or not. So that raised this query Sir.

 

 

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