Question ID :
44905
Compulsory Acquisition for Highway project - Whether exempted from income Tax
Dear All, An assessee's vacant residential land was acquired by TN Govt for highways project. No Stamp duty and Registration fees was paid since both are exempted by G.O 56 CT&RD dt 29.06.17. Being a compulsory acquisition can the assessee claim exempt from Income Tax by virtue of CBDT Circular No. 36/2016 dated 25/10/2016.
CBDT vide Circular No: 36 of 2016, Dated 25/10/2016 offers due recognition to the provisions of section 96 enacted under the "RFCTLARR Act, 2013" so as to treat award under the said Act as tax-free under the Income -tax Act, 1961
No TDS done (value is Rs 31 lakhs) and the document says acquired by Tamilnadu government for public purpose and executed by the highways department. Compensation not given at Market value.
Posted by
CA. VASUDEVAN P K
on
Aug 04, 2025
Filed Under
DIRECT TAXES
Since Land is compulsory acquired by the Government, entire consideration will be exempted u/s 10(37) of Income Tax Act if all the conditions laid down are satisfied
1. An exemption under section 10(37) is available only to an individual or a Hindu Undivided Family.
2. The exemption is available towards capital gain arisen on the transfer of agricultural land.
3. The said agricultural land should have been used, for a period of two years immediately before the date of transfer, for the agricultural purpose by- An individual or his parent; or A Hindu Undivided Family.
4. The transfer of capital gain is on account compulsory acquisition under any law or the transfer consideration for which is determined / approved by the Central Government or the Reserve Bank of India.
5. The consideration or compensation from the transfer should have been received on or after 1st April 2004.
In case all the above conditions are fulfilled, the capital gain arising on compulsory acquisition of an urban agricultural land would be exempted under section 10(37) of the Income Tax Act.
Posted by
CA Ravish Thakur on
Aug 06, 2025