Exemption of income on compulsory acquisition of any land under the RFCTLARR Act.
Existing Section 11 read with Schedule III of the Act provides exemption to certain eligible persons on their total income. The said Schedule inter alia provides exemption to an individual or a Hindu undivided family on any income chargeable under the head “capital gains” arising from the transfer of agricultural land subject to the conditions specified therein.
2. Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act) inter alia provides that incometax shall not levied on any award or agreement made (except those made under section 46) under the said Act.
3. In order to resolve any ambiguity, CBDT vide Circular No.36/2016 clarified that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of Income-tax Act, 1961 even if there are no specific provisions of exemption for such compensation in the Income-tax Act, 1961.
4. In order to align the provisions of the Act with the RFCTLARR Act it is proposed to amend the said Schedule to provide exemption on any income in respect of any award or agreement made on account of compulsory acquisition of any land, carried out on or after the 1st April, 2026, under the RFCTLARR Act (other than the award or agreement made under section 46 of said Act).
5. These amendments will take effect from the 1st day of April, 2026 and shall accordingly, apply in relation to the tax year 2026-27 and subsequent tax years.
[Clause 108]