Is compensation money taxable?

Any element of a damages or compensation payment that represents interest will be taxable as income for income tax purposes.

What is interest received on compensation?

Thus, the interest received on compensation/enhanced compensation to the assessee is nothing but a capital receipt and the addition is against the law. This issue has been decided by the Hon’ble Apex Court in case of Union of India Vs.

Is solatium taxable?

In the case of Ghanshyam (supra), the Hon’ble Supreme Court held in unequivocal terms that the additional amount u/s 23(1A), solatium under section 23(2) and interest on excess compensation u/s 28 of the Land Acquisition Act form part of enhanced compensation u/s 45(5)(b) and, therefore, is subject to tax u/s 45(5) in …

What is interest on compensation or enhanced compensation?

145B. (1) Notwithstanding anything to the contrary contained in section 145, the interest received by an assessee on any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the previous year in which it is received.

Is compensation a capital or income?

Compensation for personal suffering and injury is exempt from capital gains (and income) tax. The exemption applies to ‘compensation or damages for any wrong or injury suffered by an individual in his person or in his profession or vocation’.

What is meant by enhanced compensation?

Related Definitions Enhanced Compensation means the Participant’s Compensation plus any amount deferred under The Chubb Corporation Key Employee Deferred Compensation Plan (2005) or its successor.

How is solatium calculated?

According to the new land acquisition law, solatium equivalent to 100% of the market value multiplied by various factors, whether the land was situated in a rural or urban area, constituted minimum compensation package to be given to those whose land is being acquired.

How is compensation calculated for acquisition of land?

the article deals with the position of law over the acquisition of agricultural and non agricultural land. it also dealt with manner of calculating the amount of compensation on acquisition… Compensation on Acquisition of Agricultural and Non- Agricultural Land: A Comparative Study

Do you have to pay for compulsory acquisition of land?

Compensation has to be provided for valuation of land that is privately owned, as well as of private rights in state-owned land, and of customary and informal rights. Compulsory acquisition is a power of government, but it is also the process by which that power is exercised.

Why do we need compensation for compulsory acquisition?

Compensation, whether in monetary terms or the replacement of land, is an essential requirement of compulsory acquisition. As a direct result of government action, people lose their homes, their land, and at times their means of livelihood. Compensation is to repay them for these losses, and should be based on principles of equity and equivalence.

Do you pay capital gain tax on land acquisition in India?

For acquiring private land, governments are required to pay compensation and also rehabilitate and resettle the affected persons in India. A person needs to pay capital gain tax on the profit portion of the compensation received under compulsory acquisition.