# TDS on Compensation for Compulsory Acquisition - Section 194LA

## Who Deducts?

Any person responsible for paying to a resident any sum in the nature of:

Compensation, OR
Consideration

on account of compulsory acquisition under any law of any immovable property (other than agricultural land).

## Threshold

TDS is required only if such payment or aggregate of such payments to a resident during the financial year exceeds ₹5,00,000.

## Rate

10% of the payment.

## Exclusion

No TDS if the compensation is for compulsory acquisition of agricultural land — such compensation is itself exempt under section 10(37).

## RFCTLARR Act 2013 Exemption

Where the award/agreement is exempt from income-tax under section 96 of the RFCTLARR Act, 2013, no TDS under section 194LA is required.

Worked example

### Example 1

Example: The government compulsorily acquires Mr. A's (non-agricultural) property and pays him ₹4,50,000 as compensation. Is TDS applicable?

Solution:

Payment to resident: Yes.
Compulsory acquisition: Yes.
However, ₹4,50,000 does NOT exceed the ₹5,00,000 threshold.
⇒ No TDS liability under section 194LA.

⚠️ Common exam mistakes

Deducting TDS even where threshold of ₹5,00,000 is not crossed.
Applying section 194LA to compensation for agricultural land — agricultural land is excluded.
Forgetting the section 96 of RFCTLARR Act, 2013 exemption — overrides 194LA where applicable.

Bare-Act text 194LA · Income-tax Act, 1961 · click to expand

As per section 194LA, any person responsible for payment to a resident, any sum in the nature of compensation or consideration on account of compulsory acquisition under any law, of any immovable property, is required to deduct tax at source, if such payment or the aggregate amount of such payments to the resident during the financial year exceeds ₹5,00,000.

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Section 194LA - TDS on Compulsory Acquisition of Immovable Property

Worked example

⚠️ Common exam mistakes