TDS on compensation given by NHAI on agriculture land acquisition for highway

It is exempt u/s 10 (37). Hence no TDS is applicable 

Section 194LA of Income Tax Act, 1961 entails that  the payment must be in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property, other than agricultural land; The tax must be deducted at the rate of 10 per cent. No surcharge or health and education cess shall be added to the above rates. Hence, tax will be deducted at source at the basic rate. The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.


The agricultural land situated in rural area is not considered as capital assets under income tax laws. Since the agricultural land sold  is situated in rural area and which is not treated as capital asset and any profit received on sale of such asset cannot be taxed as capital gains.

Conclusion are  being TDS not to be deducted on Compensation received on acquire of Agricultural land.

Hope I answered to the mentioned query

There are few questions which needs to be answered first.

1. Whether you were using this land for agricultural purpose?

2. Is it rural agricultural land?

3. Whether the land was purchased under RFCTLARR Act?

If yes the capital gain shall be exempt: https://www.incometaxindia.gov.in/Communications/Circular/Circular362016.pdf

Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

- TDS is not applicable as it is an agriculture land. TDS rate is 10%

- Section 10(37) is not applicable on company

- Refer circular no. 36/2016

For detailed discussion you may opt for phone consultation

Rural agricultural land is not a capital asset. Therefore, the transfer is not a taxable transfer. 

If land is purchased underRight to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, the compensation is exempt. 

If it is not an agricultural land, TDS will be 10% under section 194LA