If your land is being taken for any government project like highway, expressway or airport, then Budget 2026 has given big relief to the land owners. Now the compensation received under RFCTLARR Act, 2013 will be completely tax free. The government has made it clear that Section 96 of this Act will override the Income Tax Act. This means that whether the land is urban or rural, agricultural or non-agricultural, there will be no capital gains tax on the compensation in case of compulsory acquisition. This rule will clearly come into effect from April 1, 2026. However, one important thing is that the interest received on compensation is not tax free. This will be considered as Income from Other Sources and tax will have to be paid as per the slab in the new tax regime.
Budget 2026: Now tax-free rules on compensation received in Government Land Acquisition. Money Live | Budget 2026: Compensation received for government land acquisition will now be tax-free
