The Orissa government has decided to write to the Centre for waiver of income tax levied on the compensation paid to the displaced persons during land acquisition for various projects.

Though the relevant act exempts collection of income tax on the compensation paid for the agriculture land, the tax is collected at the rate of 10 per cent on the compensation paid towards the building and structures existing on the acquired land if they are valued at above Rs one lakh.

As per the provisions of the Act, tax is deducted at the source during payment made to the affected persons by the company or organization acquiring the land.

The land acquisitions should not be treated as willful sale of land by the project affected people, who are normally persuaded to part with their property for setting up of various projects. Hence collection of income tax on such deals is improper, says GVV Sharma, state revenue secretary. If at all income tax is levied in such cases, it should be collected from the companies or authorities acquiring the land and not from the affected persons, he argued.

The collection of IT on compensation amount also defeats the avowed policy of the government to maximize benefits to the affected persons. On one hand, the government is giving a solatium of 30 per cent on the value of the properties to the affected persons during land acquisition and ironically on another hand, it is collecting tax on the compensation paid to them, pointed out Biranchi Pani, an activist fighting for the rights of land losers in Talcher area.

Protests over land acquisition being a sensitive issue coming in the way of setting up of many mega projects in the state proposed by likes of Posco, Arcelor Mital, Tata Steel, Vedanta and Jindal Steel and Power in the private sector and Mahanadi Coalfields and NTPC in the public sector, the collection of income tax on compensation paid to the affected persons is expected to add fuel to anti-land acquisition agitations in different parts of the state.

Sources said, the IT authorities have already sent notices to Mahanadi Coalfields Ltd (MCL) for tax deduction at source (TDS) in cases of payment of compensation against acquisition of land in their area of operation. This has been resented by the people who have lost their land and properties to the MCL projects.

MCL authorities had drawn the attention of the Angul district administration to the development following which the later had written to the state revenue department for resolution of the issue.

IT being a Central authority, we have limited role to resolve the issue. However, we have decided to write to the Centre to look into the matter and amend the relevant act for the interest of the project affected persons in the state, says B.N. Das, director, Resettlement and Rehabilitation, Orissa government.