Capital Gain Tax on Compulsory Acquisition of Land
Government and Government Departments acquire land compulsorily from owners of land for road widening, new projects as in all these cases, there was no offer from the landlords to sell the land. The purpose of acquisition is to benefit the public at large.
As per Sec 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013, income tax cannot be charged on the gain arising from compulsory acquisition of land by the Government. Since this exemption is not straight away available in the Income Tax Act, 1961, relief may not be available from the Assessing Officer or Commissioner of Income Tax (Appeals). However there is a fair chance of getting relief from the Income Tax Appellate Tribunal.
Income Tax Appellate Tribunal Chennai C Branch, has held in the case of Deputy Commissioner of Income Tax verses Udhava Das Forma (INDL) and connected 5 cases that Land Acquisition Compensation and interest are not taxable since it is neither capital gain nor income. The Tribunal observes that Land Acquisition is neither purchase nor sale and there is no intention to make profit.
In case you have any case relating to compulsory acquisition of land, there is a fair chance of getting full refund of TDS, not only on compensation but also on interest.There are several decisions in favour of the assesse.