Govt Acquired Your Agricultural Land? Is that 100% Tax-Free?
⚡ Quick answer Section 10(37) (Income-tax Act, 1961) fully exempts capital gains of an individual or HUF when urban agricultural land is compulsorily acquired . In the Income-tax Act, 2025 (from 1 April 2026), the same exemption sits in Section 11 read with Schedule III . From tax year 2026-27, Schedule III also exempts income from an award or agreement under the RFCTLARR Act, 2013 (except Section 46 deals) for individuals and HUFs, for agricultural and non-agricultural land. Rural agricultural land is not a capital asset at all, so there is no capital gains tax on it. 👀 Eye-opener: "Government land = tax-free" is only half true The exemption depends on who owns the land, how it was used and which law was used to acquire it. Miss one condition and a ₹1.25 crore award can attract about ₹15.7 lakh of tax (example below). Hidden risk: land left fallow, or used for a non-farm purpose, in the 2 years before acquisition can lose the 10(37) exemption....