Land Acquired for Road Development: Tax Implications for 6000 sq ft Plot?

Ans: The compensation paid by the government after the acquisition of land for road widening is taxable under certain circumstances.

According to the Income Tax Act, 1961, any compensation received by an individual or a Hindu Undivided Family (HUF) for the compulsory acquisition of any capital asset, including land, is considered as a capital receipt and is generally not taxable. However, if the compensation received is more than the cost of acquisition or the fair market value of the asset at the time of acquisition, then the excess amount is taxable as capital gains.

Furthermore, if the land that is acquired was used for business purposes, then the compensation received would be taxable as business income. The compensation would be considered as a revenue receipt and would be taxable in the year in which it is received.

It is advisable to consult with a qualified tax professional or chartered accountant to determine the specific tax implications of any compensation received for the acquisition of land in India.