Compensation for Land Acquisition in India

The government (Central or State) may choose to acquire different pieces of land for different purposes, such as to develop roads, water harvesting, industrial corridors, manufacturing zones, etc. The government plans such projects, where it also lists down the land it must acquire to bring the project to reality. While doing so, they must ensure that the landowner and anyone else that has been affected receives adequate compensation in exchange for that specific piece of land.

The government is also responsible for the rehabilitation and resettlement of individuals affected by the acquisition process.

Land Acquisition in India

The process of land acquisition was previously governed by the provisions of the Land Acquisitions Act, 1894. As per this Act, only the landowners were supposed to receive compensation during land acquisition. The Act does not address compensating other individuals that are affected by such acquisitions.

After several attempts of the United Progressive Alliance (UPA) Government, the Land Acquisition Act, 1894 was replaced by a new Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (LARR Act, 2013), which came into force from 1 January 2014.

• LARR Act, 2013 aims to not only compensate owners but provide rehabilitation and resettlement benefits to those that have been affected by the acquisition as well.
• The minimum compensation paid to landowners is calculated based upon different factors such as market value, etc.
• It forbids any acquisition when the intended acquisition includes multi-crop irrigated area.
• The Act changed norms for acquisitions of land for use by private companies or in the case of public-private partnerships, including compulsory social impact study, which needs to be conducted before such an acquisition is made.

The LARR Act, 2013 was laid down to meet two objectives, i.e., farmer’s welfare and to expeditiously meet the strategic and developmental needs of the country.

Other Acts that Influence Land Acquisition

Apart from LARR Act, 2013, the process of land acquisition is governed by some other Acts that are mentioned below:

• The Land Acquisition (Mines) Act, 1885
• The Damodar Valley Corporation Act, 1948
• The Metro Railways (Construction of Works) Act, 1978
• The Indian Tramways Act, 1886
• The Resettlement of Displaced Persons (Land Acquisition) Act, 1948
• The Railways Act, 1989
• The Requisitioning and Acquisition of Immovable Property Act, 1952
• The National Highways Act, 1956
• The Atomic Energy Act, 1962
• The Coal bearing areas Acquisition and Development Act, 1957
• The Electricity Act, 2003
• The Petroleum and Minerals Pipelines (Acquisition of Right of User of Land) Act, 1962
• The Ancient Monuments and Archaeological Sites and Remains Act, 1958

Scope of Right to Fair Compensation & Transparency

The LARR Act, 2013 aims to lay down land acquisition laws along with rehabilitation and resettlement of individuals affected by such acquisitions.

Note: When it comes to the scope of the Act, it covers all kinds of land acquisition, irrespective of whether it is done by the Central Government or any State Government of India, except the state of Jammu and Kashmir.

States are allowed to establish their own legislation and policies on land acquisition, provided they are not less than what is stated in the Central Act (Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013).

Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 would be applicable when the government:

• Acquires land for its own use, hold and control.
• Acquires land with the aim of transferring it to private companies for the State’s public purpose. The public purpose of the Act includes public private partnership projects, but excludes land acquired for stated national highways projects.
• Acquires land for immediate and declared use by private companies for public purposes.

Quantum of Compensation to be Awarded

Section 26 of the Act consists of provisions that govern compensation for the landowners. It defines the proposed minimum compensation, based on multiples of the market value of the land. The market value is usually multiplied by a factor of one or two times, for land acquired in rural and urban areas.

The average sale price for similar types of land in the nearest village or nearest vicinity area helps determine the market value of any piece of land. The sale price is calculated by considering one-half of the total number of sale deeds or the agreements to sell, in which the highest price has been mentioned.

The compensation can also be a consented amount in case the land is acquired for private companies or public-private partnership projects.

Note: The compensation for owners is set to be four times the market value in cases of rural areas and twice in cases of urban areas.

It must be noted that no land can be acquired without any compensation. The Supreme Court of India deemed it so that the acquisition would be considered flawed in the absence of an actual receipt of compensation.

Section 39 covers additional compensation equivalent to the compensation determined under this Act for the second or successive displacements to be awarded in case of multiple displacements of any family.

What are the Consequences of Delaying Compensation?

• Any delay in awarding compensation in cases of land acquisition by the government shall be borne by the ‘State’.
• The owner of the land acquired shall be entitled to interest from the date of deprivation of possession.
• The Supreme Court said that the State cannot hide behind delays and excuses and evade its responsibilities. The compensation cannot be paid only to those who approach the Court for the same.
• The landowner will be entitled to consequential benefits of solatium and interests on all sum payable under the law with effect from 16
• October 2001, i.e., the date of issuance notification under Section 4 of the Act, till 12 September 2013 and shall further be entitled to costs and legal expenses.

Is the Compensation Received for Land Acquisition Taxable?

• Compulsory acquisition of land by a government agency is considered as a transfer under the Income Tax Act, and requisite Capital Gains Tax is attracted, which is to be computed as per the provisions set down.
• Section 96 of the LARR Act, 2013 states that ‘No Income Tax’ or ‘Stamp Duty’ shall be charged on any award or agreement made under the LARR Act, 2013 when the land is being acquired by the appropriate government (including government companies and trusts/AOPs/societies controlled by the government), except under Section 46, wherein Section 46 deals with land purchase by non-government/private entities through LARR Act, 2013. Enhanced compensation as awarded by Courts is taxable under the head ‘Capital Gains’. Further, interest on compensation as awarded by the Courts will be taxable in the year of receipt of such enhanced compensation under the head ‘Income from Other Sources’.

Conclusion

Irrespective of whether it is the State or the Central Government acquiring the land, an apt compensation must be paid to the landowner and any other individual who is affected by such acquisitions. While the law didn’t allow the latter to be paid before, the amendment in 2013 allowed them to receive compensation. Further, the government shall be responsible for the rehabilitation and resettlement of affected individuals.