Section 194LA - TDS on Compulsory Acquisition of Immovable Property
# Section 194LA - TDS on Compensation on Compulsory Acquisition
## Who Deducts
Any person responsible for paying any sum in the nature of Compensation or Enhanced Compensation on compulsory acquisition of immovable property (other than agricultural land) situated in India.
## Payee
Any resident.
## Threshold
Amount or aggregate > ₹ 5,00,000 in a F.Y.
## Rate of TDS
10%
## When to Deduct
At the time of payment.
## Excluded
Agricultural land (no TDS)
Property outside India
Worked example
### Example 1
Example: NHAI pays ₹ 20,00,000 compensation to Mr. M (resident) for compulsory acquisition of his urban plot.
Solution: Exceeds ₹ 5,00,000 → TDS @ 10%.
TDS = 10% × ₹ 20,00,000 = ₹ 2,00,000.
### Example 2
Example: State Govt. pays ₹ 8,00,000 compensation to Mr. N for compulsory acquisition of his rural agricultural land.
Solution: No TDS — rural agricultural land is excluded.
⚠️ Common exam mistakes
Deducting TDS on compensation for agricultural land — excluded
Confusing 194LA (compulsory acquisition) with 194-IA (regular sale)
Bare-Act text Section 194LA · Income-tax Act, 1961 · click to expand
Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon. Provided that no deduction shall be made where the amount or aggregate amount during the financial year does not exceed five lakh rupees.