Question ID : 35865

TAXABILITY OF COMPENSATION FOR ACQUISITION UNDER RFCTLARR ACT

COMPENSATION HAS BEEN PAID TO THE ASSESSEE FOR ACQUISTION OF LAND AND BUILDING BY NHAI UNDER RFCTLARR ACT.COMPENSATION HAS THREE COMPONENTS AS BELOW: 1.VALUE OF LAND. 2.VALUE OF BUILDING. 3.INTEREST ON DELAYED PAYMENT. KINDLY ADVICE ARE ALL OF THE THREE PAYMENTS ARE EXEMPT FROM INCOME TAX OR IF ANY ONE OF THE ABOVE IS TAXABLE. LAND IN NON AGRICULTURE .

Answer ID : 76006

Interest is taxable. Land and building exempted. Inference -- section 3(p) of the referred act.

Answer ID : 76007

3. As no distinction has been made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under the RFCTLARR Act, the exemption provided under section 96 of the RFCTLARR Act is wider in scope than the tax-exemption provided under the existing provisions of Income-tax Act, 1961. This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land. The matter has been examined by the Board and it is hereby 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. 2,Interest is taxable.

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