No tax on compensation received from govt on acquisition of land

Is govt eyeing your land? Worried about paying tax on compensation you’ll receive? Not anymore. The Budget 2026 has brought an important amendment exempting compensation received on compulsory acquisition of land under Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act).

The proposal says the relief will be applicable to individuals and HUFs. With govt pushing for infrastructure development sin urban areas such as metro train networks, industrial corridors and the like, land acquisition is on a rise. The proposal is expected to help landowners. However, this relief will not apply to acquisitions by private players or through mixed structures.




On the proposal, Rahul Charkha, partner at Economic Laws Practice, said, “The amendment incorporates the exemption that was earlier provided under Section 96 of the RFCTLARR and CBDT Circular 36/2016. The amendment also considers a decision of the tax tribunal (Amritsar Bench) wherein it was held that compensation from compulsory acquisition of land under the National Highways Act is exempt from income tax by virtue of Section 96 of the RFCTLARR, 2013. The relief is broader than the old capital-gains exemption for specified agricultural land. It will help owners of non-agricultural, and urban land acquired for roads, rail, metro, industrial corridors and other public projects.”