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Expert Exchange Home: Direct Tax Ask a Question
AuthorQuestion Title
Valsa George
Kochi
Taxability on compensation received for land usage

Power Grid Corporation of India has paid me Rs. 40 lakhs as compensation for passing Heavy
Electrical lines over my ancestral agricultural land of 40 cents in a Municipality area. They have
deducted Rs 4 lakhs U/S 194 A of I.T.Act. The proceedings were started under Indian Telegraph Act
1885. The said land is still under my possession and I am doing agriculture there with certain
restrictions such as only dwarf crops; no building construction on the land etc. Since there is
no transfer of land or ownership, should I pay Capital Gain tax on the amount of 40 lakhs ?
Replies
Mihir
Hyderabad
Compensation in deminution value of agricultural land is tax free . It is neither taxable nor TDS to
be withheld from the compensation payment as it did not meet conditions under any of the sections
of 193/194 /196. Several case laws are available. You should claim refund of TDS amount and income
of Rs 40 lakhs should be shown under section 10 of the it act

Santhanam
Chennai
There is no transfer of property, hence no capital gains. The receipt is capital receipt as
compensation, it cannot be taxed as Income. Thus no tax to be paid.

R GANDHIRAJ
SALEM
THE LAND OWNER SUBSTANTIAL LOSS HIS RIGHT OF CONSTRUCTION,TRANSFER, CULTIVATION OF OTHER CROPS, AND
LOSS IN MARKET VALUE OF LANDS. WHY DO NOT WE CONSIDER IT AS CAPITAL RECEIPTS,IN SUBSTITUTE OF
AGRI.INCOME

C.Ananda Kumar
Chennai
You donot have any Capital Gains asthere is no transfer of an asset. But payment of 40 lakhs can be
interpreted as rent for the usage of your land and TDS u/s.196I is perfect. 194A is not applicable
as it is not interest. Calling it a Contract payment and deduction of 1% instead of 10% is remotely
possible,if any duties of maintenance etc are cast to the land owner. 40 lakhs is definitely
taxable and cannot be called Agricultural Income.


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