CBDT Issued a Circular No.36/2016
[F.NO.225/88/2016-ITA.II], dated
25-10-2016 to clarify taxability of compensation and enhanced compensation received
by Land Owners for agriculture and non agriculture land acquired under RFCTLARR
Act.
According to the provisions of the Income-tax Act,
1961, agricultural land not situated in specified urban area is not regarded as
a capital asset. Therefore, Capital Gain arising from transfer or compulsory
acquisition of such agricultural land is not taxable.
However, as per section 10(37), Capital Gain arising from transfer
of agricultural land would not be taxable in case of an individual or HUF subject
to fulfillment of following conditions:
i.
Such land is
situated:
ii.
(a) in any area which is comprised
within the jurisdiction of a municipality (whether known as a municipal
corporation, notified area committee, town area committee, town committee, or
by any other name) or a cantonment board and which has a population of not less
than ten thousand according to the last preceding census of which the relevant
figures have been published before the first day of the previous year; or
(b) in any area within such distance, not being more than eight kilometers, from
the local limits of any municipality or
cantonment board referred to in item (a), as the Central Government may,
having regard to the extent of, and scope for, urbanization of that area and
other relevant considerations, specify in this behalf by notification in the
Official Gazette.”
iii.
Such land
during the period of two years immediately preceding the date of transfer, was
being used for agricultural purposes by such Hindu undivided family or
Individual or a parent of his;
(iii) Such transfer is by way of compulsory acquisition under any
law, or a transfer the consideration for which is determined or approved by the
Central Government or the Reserve Bank of India;
(iv) Such income has arisen from the compensation
received by such assessee on or after the 1st day of April, 2004.
The RFCTLAAR Act was brought into force in 2014 but
Income Tax Act for Agriculture Land was amended in 2004. As per Section 96 of
the RFCTLARR Act income-tax shall not be levied on any award or agreement made
(except those made under section 46) so compensation received for compulsory
acquisition of land except those made under section 46 of RFCTLARR Act, is
exempted from the levy of income-tax. Since no distinction has been made
between compensation received for compulsory acquisition of agricultural land
and non-agricultural land, the CBDT has issued this circular to clarify the
uncertainty created by RFCTLAAR by providing exemption of tax under section 96
of the RFCTLARR Act.
CBDT has clarified that compensation received in
respect of award or agreement which has been exempted from levy of income-tax
vide section 96 of the RFCTLARR Act shall also not be taxable under the
provisions of Income-tax Act, 1961 even if there is no specific provision of
exemption for such compensation in the Income-tax Act, 1961.
Sir,
ReplyDeleteWhat about interest component in such compensation.
Interest is taxable if it crosss the exemption limit
ReplyDeleteSIR,
ReplyDeleteCIRCULAR SAYS compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act.
But in many of the cases Acqusition proceedings have commenced in old Act Like in Karnataka KIADB Act and acqusition proceedings were concluded under KIADB Act. The Compensation is calculated as per RFCTLARR ACT. Now the circular is not clear as whether the exemption is applicable to these type of cases where acqusition is concluded under other Act (KIADB)
As Second proviso was inserted to Sec 194 LA for not to deduct TDS. In this case the special acquistion officer is deducting TDS to avoid consequenses of non deduction of TDS.
Kindly Clarify applicablity of Circular to other Acts and Provision of TDS
COMPENSATION HAS BEEN CALCULATED AS PER SECTION 30 (3) OF RFCTLARR.
DeleteSINCE COMPENSATION HAS BEEN PAID ACCORDING TO THIS ACT, SO EXCEMPTION HAS BEEN GRANTED.
RFCTLARR ACT HAS WIDER SCOPE THAN INCOME TAX ACT 1961.
WE CAN CLAIM EXEMPTION UNDER THE SCHEDULED EI OF ITR 3 OF AY 2017-18
AS OTHER EXEMPT INCOME.
THE ABOVE VIEW AS PER MY UNDERSTANDING,YOU MAY CORRECT ME.
Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 provides for exemption form income tax for all compensation against compulsory acquisition of land whether rural or urban and whether agricultural or non-agricultural to all assessees irrespective of status whereas s. 10(37) of Income Tax Act, 1961 provided for exemption to Individuals and HUFs only for agricultural land. This provision is a special provision. There should not be any TDS also form compensation for compulsory acquisition of land.
ReplyDeleteCompensation received for Agricultural land acquired by NHAI...must not be taxable.. your opinion.?
ReplyDeleteOnly Individual and HUF are entitled for exemption.
ReplyDeletewhat about the tax liability if the compensation was declared before 31/12/2014 but the award was given after 01/01/2015 ie after commencement of the RFCTLARR 2013
ReplyDeletesection 96 of RFCTLARR Act says that compensation received for compulsory acquisition on agricultural land & non agricultural is exempt & tax cannot be levied (except those made under section 46 of of RFDCTLARR Act).
ReplyDeleteBut Section 46 specifically provided provisions relating to Rehabilitation & resettlement. My question is what about the provision relating to land acquisition??
hi sir,
ReplyDeleteland of an apartment association is acquired by Metro rail corporation at bangalore. whether the compensation on land acquisition is taxable or exempted.
Gm sir
ReplyDeleteIf non agriculture land compulsory acquire by nhai then exempt or not under income tax.
IN THE INCOME TAX APPELLATE TRIBUNAL
ReplyDeleteDELHI BENCH: ‘G’ NEW DELHI
We, therefore, do not have any doubt in our mind as to the law in this
aspect and while respectfully following the ratio laid down by the Hon’ble
Supreme Court in the case of Ghanshyam (supra) and Hari Singh (supra) above,
direct the ld. AO to refund the TDS amount that was deducted on account of the
enhanced compensation. With these directions, we allow the appeal of the
assessee.
Is an assessee required to disclose in Income Tax Return compensation received for compulsory acquisition of land by Government ? If yes then where to disclose in ITR 3. Please guide. Thanks
ReplyDeleteThe questions is still unanswered that if the non-agricultural land is acquired under the National Highways Act 1956 then it is exempted from tax liability or not? Because the circular no. 36/2016 is regarding the act of 2013 specifically. Kindly answer
ReplyDelete