Positive impactOrders & Deals
Land acquired by the government? ITAT says interest on enhanced compensation may be exempt from tax
Mint 55 min ago·14 Sept 2026, 8:26 am
The Income Tax Appellate Tribunal (ITAT) in Rajkot has ruled that interest earned on enhanced compensation for government-acquired agricultural land can be tax-exempt. This decision follows a specific case where the tribunal found that the interest was not a profit from business but rather a return on capital, qualifying for exemption under Section 10(37).
This ruling is significant for landowners who have received compensation for their land. It clarifies that the interest portion of the payout is not subject to income tax, potentially improving the net returns for these investors. The decision sets a precedent that could influence similar future cases involving compulsory land acquisition.
Investors should watch for the extent to which this ruling is applied by other tax authorities and courts. If the principle is broadly accepted, it could provide a clear tax benefit for a specific group of investors, though it is important to note that this applies only to the interest component of the compensation.
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