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

Hello sir
Our is a limited company and has agriculture land in Punjab purchased in year 2005, the same has been acquired by NHAI in 2021 and now giving compensation through concerned SDM office, issue is whither the officer is liable to cut tds on compensation and whither this amounts is tax free nd no capital gain on it. We are limited company or Land officer can issue payment without deducting tds in limited company case . Amount is 1 cr. Plz give law or govt circular on this if possible. Thanks
Asked 2 years ago in Capital Gains Tax

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

Vidya Jain
CA, Kolkata
1009 Answers
58 Consultations

4.8 on 5.0

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

Shiv Kumar Agarwal
CA, Delhi
489 Answers
74 Consultations

5.0 on 5.0

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.

Naman Maloo
CA, Jaipur
4271 Answers
97 Consultations

5.0 on 5.0

- 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

Vivek Kumar Arora
CA, Delhi
4838 Answers
1037 Consultations

5.0 on 5.0

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

Prerna Peshori
CA, Pune
194 Answers
11 Consultations

5.0 on 5.0

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