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 ?
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
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.