Govt allows 10% deduction on compensation for land acquisition

FM said the tax deduction has been allowed to curb the tendency of evading taxes by not reporting the income comprised in compensation.

Government on Thursday proposed to make a provision for deduction of tax at the rate of ten per cent on the amount of compensation paid to owners for acquiring their land or residential building by its various agencies and local authorities.

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Announcing the new provision in the Lok Sabha while presenting the 2004-05 General Budget, Finance Minister P Chidambaram said this has been done to curb the tendency of evading taxes by not reporting the income comprised in the compensation.

He, however, said no deduction of tax shall be made where the immovable property acquired is agricultural land, situated within municipal limit or not and where the amount of compensation paid is less than Rs 1 lakh.

The new provision would come into effect from October 1, 2004, the Minister said.