For a landowner, the identity of the statute under which the land is taken ought to be a matter of indifference. The Constitution does not grade citizens by the acquiring department: whether the road is a National Highway, the line a railway, or the plot a general acquisition, the owner surrenders the same property and deserves the same measure of justice. Yet for years the law told a different story. Land taken under a handful of “special” enactments was compensated on a thinner scale than land taken under the general law, and the difference could run to crores. This article traces how that disparity arose, and how two developments — an executive order of 2015 and a Supreme Court judgment of 2019 — have very largely cured it. It explains how land acquisition compensation under the National Highways and Railways Acts has been brought into alignment with the LARR Act, 2013. The practical message is simple, and we state it at the outset: whatever the acquiring statute, a landowner today should insist on First-Schedule-level compensation, and identify which of the two remedies applies by looking at the notification date.

For the architecture of the 2013 Act and its Schedules, see Spoke 1 of this series; for the forums in which these claims are pressed, see Spoke 3.

The problem: a two-tier land Acquisition compensation regime

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (“the 2013 Act” or “LARR Act”) was enacted precisely to end the parsimony of the colonial Land Acquisition Act, 1894. It built a generous package into three Schedules — the First Schedule (compensation: market value under s.26, multiplied by the factor in the First Schedule of up to 1x in urban and up to 2x in rural areas, plus 100% solatium under s.30, plus the additional amounts), the Second Schedule (rehabilitation and resettlement) and the Third Schedule (infrastructure amenities).

But the 2013 Act did not sweep away every acquisition statute in the country. Certain existing enactments — thirteen of them — were listed in its Fourth Schedule and, by force of s.105 read with s.105(3), were kept outside the direct operation of the 2013 Act’s compensation and R&R machinery. Two of the most consequential entries in that Fourth Schedule were the National Highways Act, 1956 and the Railways Act, 1989 — the very statutes under which a very large share of India’s compulsory acquisitions actually take place.

The result was a two-tier regime. An owner whose land was taken under the general 2013-Act procedure received First-Schedule market value with the multiplier, 100% solatium and the additional amounts, together with Second- and Third-Schedule benefits. An owner next door, whose land was taken for a National Highway under s.3G of the 1956 Act, or for a railway under Chapter IVA of the 1989 Act, received a compensation computed by a Competent Authority under the special statute — historically without the solatium, without the multiplier, and without the R&R package. Same land, same public purpose, materially different cheque.

Worse, in the case of the National Highways Act the exclusion had been made explicit and aggressive. Section 3J of the NH Act provided, in terms, that “nothing in the Land Acquisition Act, 1894” shall apply to an acquisition under the NH Act — the practical effect being to shut out the solatium (s.23(2)) and interest (s.28) that even the 1894 Act had guaranteed. Highway landowners were thus doubly disadvantaged: denied the new 2013-Act generosity, and denied even the old 1894-Act solatium and interest.

The first cure: the Removal of Difficulties Order, 2015

The first, and broadest, corrective came from the Central Government itself. Section 113 of the 2013 Act confers a power to remove difficulties in giving effect to the Act. Exercising s.113(1) read with s.105(3), the Government issued the RFCTLARR (Removal of Difficulties) Order, 2015, dated 28 August 2015.

The Order did the one thing the 2013 Act had left conspicuously undone: it extended the land acquisition compensation, rehabilitation and resettlement and infrastructure benefits of the First, Second and Third Schedules to the thirteen Fourth-Schedule enactments — expressly including the National Highways Act, 1956 and the Railways Act, 1989. Critically, the Order was deemed effective from 1 January 2015.

What this means on the ground is concrete and substantial. An acquisition under the National Highways Act or the Railways Act, once the Order applies, can no longer be compensated on the old thin scale. It must now carry:

• First-Schedule market value determined under s.26 (the higher of the jantri value under s.26(1)(a) and the average of the top 50% of sale deeds under s.26(1)(b)), taken with the applicable value of assets under s.29;
• the First-Schedule multiplier (a factor up to 1x for urban land and up to 2x for rural land);
• 100% solatium under s.30, and the additional amounts the Act provides; and
• the Second- and Third-Schedule rehabilitation, resettlement and infrastructure entitlements.

For National Highways specifically, the position was later put beyond serious argument by the Ministry of Road Transport & Highways guidelines dated 28 December 2017, which confirm that the First Schedule of the RFCTLARR Act applies to National Highways acquisitions. A Competent Authority determining compensation under s.3G of the NH Act, or an arbitrator appointed under s.3G(5), is therefore now to compute compensation on the 2013-Act First-Schedule footing, not the old NH-Act footing.

The one limitation of the 2015 Order is temporal, and it is important. The Order is prospective: it is deemed effective from 1 January 2015. It does nothing for the owner whose National Highway or railway land was notified and acquired before that date. For that earlier population, a different remedy was needed — and it came from the Supreme Court.

The second cure: Union of India v. Tarsem Singh (2019)

The gap left open by the prospective 2015 Order was filled, at least for National Highways, by Union of India v. Tarsem Singh, (2019) 9 SCC 304.

The Supreme Court in Tarsem Singh addressed s.3J of the NH Act — the provision that excluded the 1894 Act and thereby denied solatium and interest to highway landowners. The Court held that s.3J is unconstitutional, as violative of Article 14, insofar as it denies solatium and interest. There was no rational basis, the Court reasoned, for treating a person whose land is acquired for a National Highway less favourably than a person whose land is acquired under the general law; the classification failed the equality test. Accordingly, the solatium (s.23(2)) and interest (s.28) of the Land Acquisition Act, 1894 apply to National Highways Act acquisitions — the relevant window being the period 1997 to 2015.

The 1997-2015 window is not arbitrary; it is precisely the pre-Order period. From 1 January 2015 onwards the 2015 Order supplies the (larger) 2013-Act package. For the years before that — reaching back to when the NH-Act acquisition machinery took its modern shape in 1997 — Tarsem Singh restores, at a minimum, the 1894-Act solatium and interest that s.3J had purported to strip away.

The reach of Tarsem Singh was subsequently confirmed and strengthened. The principle was reaffirmed and applied retrospectively by the Supreme Court’s order dated 4 February 2025 — meaning that highway landowners in the pre-2015 window may claim the solatium and interest even where their acquisitions had long since concluded, subject of course to the ordinary discipline of the individual case.

Together, then, the 2015 Order and Tarsem Singh interlock neatly. Neither alone would have sufficed: the Order is generous but prospective; Tarsem Singh is retrospective but narrower in what it restores (solatium and interest, under the 1894 baseline, and expressly in the National Highways context). Read together they close the disparity across the whole timeline.

The timeline: which remedy applies

Because everything turns on when the acquisition was notified, the position is best set out chronologically.

A landowner (or an acquiring authority) need only locate the notification date on this timeline to know which limb governs. For National Highway acquisitions, the MoRTH guidelines of 28 December 2017 reinforce the third row; for the pre-2015 rows, Tarsem Singh supplies the equal-treatment floor.

Practical upshot for a landowner

Three points follow for anyone facing, or already caught by, an land acquisition under a special Act:

1. Do not accept a “special-Act discount.” The premise that a National Highways or railway acquisition necessarily pays less than a general land acquisition is, for post-2015 notifications, simply wrong. Insist on First-Schedule-level compensation — market value, multiplier, 100% solatium and the additional amounts — and on the Second- and Third-Schedule benefits.
2. Fix the notification date first. The date decides the remedy. On or after 1 January 2015, invoke the 2015 Order. For a National Highway acquisition notified in the 1997-2015 window, invoke Tarsem Singh to recover solatium and interest, relying additionally on the 4 February 2025 order for its retrospective application.
3. Combine the harmonisation argument with the valuation argument. Extending the First Schedule is only half the battle; the quantum of market value under s.26 still has to be fought on comparable sales and the correct multiplier (the subject of other articles in this series). Harmonisation gets you into the First-Schedule room; valuation determines what you take home from it.

Key takeaways

• Before 2015, land taken under thirteen Fourth-Schedule enactments — notably the National Highways Act, 1956 and the Railways Act, 1989 — was kept outside the 2013 Act’s land acquisition compensation and R&R package by 105 read with s.105(3), producing a two-tier regime.
• The RFCTLARR (Removal of Difficulties) Order, 2015, dated 28 August 2015 (issued under 113(1) read with s.105(3)) extended the First, Second and Third Schedule benefits to all thirteen enactments, deemed effective 1 January 2015.
• The MoRTH guidelines dated 28 December 2017 confirm that the First Schedule applies to National Highways acquisitions.
• Union of India v. Tarsem Singh, (2019) 9 SCC 304 struck down 3J of the NH Act as violative of Article 14 insofar as it denied solatium and interest, and applied the 1894-Act solatium and interest to NH acquisitions in the 1997-2015 window — a position reaffirmed and applied retrospectively by the SC order dated 4 February 2025.
• The two remedies are complementary: the 2015 Order is prospective from 1 January 2015; Tarsem Singh reaches back to fill the pre-2015 gap for National Highways.
• Practically: identify the notification date, then claim under the 2015 Order or under Tarsem Singh accordingly, and always press for First-Schedule-level compensation.

Frequently asked questions

1. My land was taken for a National Highway in 2019. Am I entitled to the full 2013-Act compensation? Yes, in substance. Because the notification post-dates 1 January 2015, the RFCTLARR (Removal of Difficulties) Order, 2015 applies, extending the First, Second and Third Schedule benefits to the National Highways Act acquisition. That means First-Schedule market value under s.26, the applicable multiplier, 100% solatium under s.30 and the additional amounts, plus R&R and infrastructure benefits. The MoRTH guidelines dated 28 December 2017 confirm the First Schedule applies to National Highways acquisitions. The remaining battle is over the quantum of market value, not the applicability of the First Schedule.
2. My highway land was acquired in 2010, before the 2015 Order. Is there anything I can claim? Yes. The 2015 Order is prospective from 1 January 2015 and does not reach a 2010 acquisition. But Union of India v. Tarsem Singh, (2019) 9 SCC 304 struck down s.3J of the NH Act insofar as it denied solatium and interest, and held that the 1894-Act solatium (s.23(2)) and interest (s.28) apply to National Highways acquisitions in the 1997-2015 window. Your 2010 acquisition falls squarely within that window, so you may claim solatium and interest, aided by the Supreme Court’s order dated 4 February 2025 applying Tarsem Singh retrospectively.
3. Does the 2015 Order apply to railway acquisitions as well as highways? Yes. The Removal of Difficulties Order, 2015 extends the First, Second and Third Schedule benefits to all thirteen Fourth-Schedule enactments, which expressly include the Railways Act, 1989 (Chapter IVA acquisitions) as well as the National Highways Act, 1956. The MoRTH guidelines of 28 December 2017 are specific to National Highways, but the Order itself is broader.
4. Where is compensation actually determined and challenged in these special-Act acquisitions? That depends on the statute. Under the National Highways Act, land acquisition compensation is fixed by a Competent Authority under s.3G, with arbitration under s.3G(5)-(6); under the Railways Act, by a Competent Authority under Chapter IVA. The forums, and the routes for challenging the resulting awards, are discussed in Spoke 3 of this series.

Sources & authorities

• Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 — ss.26 (market value), 29 (value of assets), 30 (solatium), 105 & 105(3) (Fourth-Schedule enactments), 113 & 113(1) (power to remove difficulties); First, Second, Third and Fourth Schedules
• RFCTLARR (Removal of Difficulties) Order, 2015, dated 28 August 2015 (issued under s.113(1) read with s.105(3)) — extending the First, Second and Third Schedule benefits to the thirteen Fourth-Schedule enactments, deemed effective 1 January 2015
• MoRTH guidelines dated 28 December 2017 — First Schedule of RFCTLARR to apply to National Highways acquisitions
• National Highways Act, 1956 — ss.3G, 3G(5), 3G(6), 3J
• Railways Act, 1989 — Chapter IVA (ss.20A–20W)
• Land Acquisition Act, 1894 — ss.23(1), 23(2) (solatium), 28 (interest)
• Union of India v. Tarsem Singh, (2019) 9 SCC 304 (reaffirmed and applied retrospectively by SC order dated 4 February 2025)

The post Harmonizing Land Acquisition Compensation across Special Acts: The 2015 Order and Tarsem Singh appeared first on Bhatt & Joshi Associates.

A landowner who has fought for a fair award often assumes that the enhanced amount finally received is his to keep, in full. But is land acquisition compensation taxable? That assumption is largely—but not entirely—correct. The compensation itself carries a powerful statutory shield: Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (the “RFCTLARR Act” or “2013 Act”) exempts an award or agreement compensation from income tax and stamp duty. But the award you receive is rarely a single number. It is a bundle—market value, solatium, and, very often, a substantial interest or “additional amount” component that accrues because payment was delayed. The tax treatment of that interest component is a materially harder question, and it is where landowners and their advisers most often come to grief.

This article explains when land acquisition compensation is taxable and when it is exempt under Section 96 of the RFCTLARR Act, 2013. It examines the settled position on compensation, including how the exemption extends to National Highways and Railways acquisitions, and then analyses the more difficult question of the tax treatment of the additional amount and interest. It also covers the relevant income-tax provisions, CBDT Circular 36/2016, TDS, the year of taxability, and the practical issues taxpayers should verify before filing their returns.

A word of scope at the outset. The exemption under s.96 of the 2013 Act is a matter of land-acquisition law, and we state it as verified law. The surrounding income-tax questions — whether the exemption reaches NH/Railways compensation, the year of taxability, the interaction with agricultural-land exemptions, TDS, and the treatment of the interest component — have been researched and are stated below with citations to CBDT Circular 36/2016, reported case law and specific Income-tax Act provisions.

This is the eighth spoke in a nine-part series on fair compensation in Indian land acquisition; see Fair Compensation in Indian Land Acquisition: LARR, Railways and National Highways — A Practitioner’s Map for the full map.

1. The core exemption: Section 96 of the RFCTLARR Act, 2013

Section 96 of the 2013 Act provides that no income tax or stamp duty shall be levied on any award or agreement made under the Act (other than under Section 46), and that no person claiming under such an award or agreement shall be liable to pay any fee for a copy of the same.

Three features of this exemption deserve emphasis.

(a) It is a statutory exemption, not a concession. The exemption operates by force of the 2013 Act itself. It attaches to compensation “made under this Act” — that is, to an award under s.23, or to a negotiated agreement, arrived at within the 2013 Act’s framework. The carve-out for s.46 (which deals with land purchased through private negotiation above the notified threshold, triggering R&R obligations) is the only stated exception.

(b) It covers both income tax and stamp duty. For the landowner, this means the compensation is not to be brought to tax as income by virtue of s.96, and the instrument recording it does not attract stamp duty. This is a real and valuable protection, particularly for agricultural landowners whose holdings have been compulsorily taken.

(c) It is the compensation that is exempt. Section 96 speaks of the “award or agreement.” The natural reading is that the components that make up the award — market value determined under s.26, the parameters under s.28 (severance, injurious affection, diminution of profits), the value of assets under s.29, and the 100% solatium under s.30 — are all within the shield, because they are all constituent parts of the award made under the Act. The question that s.96’s language does not answer cleanly is how the interest / additional-amount heads are to be treated for income-tax purposes. We return to that in Part 3.

Cross-reference — Spoke 1 (the heads of an award). For the anatomy of a 2013-Act award — market value (s.26), the s.28 parameters, s.29 assets, s.30 solatium and the s.30(3) additional amount, and s.80 interest — see The Compensation Architecture of the LARR Act, 2013 (Spoke 1). This article assumes that breakdown and focuses on how the tax shield maps onto it.

2. The exemption reaches National Highways and Railways acquisitions — via the 2015 Order

A recurring and important question is whether the s.96 exemption is confined to acquisitions made under the 2013 Act itself, or whether it also protects compensation paid under the special acquisition statutes — most importantly the National Highways Act, 1956 and the Railways Act, 1989.

The answer turns on the interaction between s.105, s.113 and the RFCTLARR (Removal of Difficulties) Order, 2015.

Section 105 of the 2013 Act carves the thirteen enactments listed in the Fourth Schedule (which include the National Highways Act, 1956 and the Railways Act, 1989) out of the general application of the Act, but s.105(3) required the Central Government to bring the beneficial provisions of the 2013 Act to bear on those enactments. To give effect to that mandate, and exercising the power to remove difficulties under s.113(1) read with s.105(3), the Central Government issued the RFCTLARR (Removal of Difficulties) Order, 2015, dated 28 August 2015, deemed effective 1 January 2015. That Order extended the compensation, rehabilitation and resettlement, and infrastructure benefits of the First, Second and Third Schedules of the 2013 Act to the thirteen Fourth-Schedule enactments, including the National Highways Act and the Railways Act.

The consequence for taxation is significant and, in our view, follows as a matter of coherence. Once the compensation payable for an NH or Railways acquisition is computed on the 2013-Act measure — the First Schedule market value, multiplier, solatium and additional amount — the compensation so paid is compensation determined by the standards of the 2013 Act. The s.96 exemption, which protects the award or agreement made under the Act’s framework, is best read as travelling with that compensation. A landowner whose land is taken for a national highway and paid on the First-Schedule scale is, on this reading, within the same exemption as a landowner acquired directly under the 2013 Act.

This reading has since been directly confirmed by the Chhattisgarh High Court in Sanjay Kumar Baid v. Income Tax Officer, 2025:CGHC:47243-DB (15 September 2025). The Court held that once compensation is determined under the RFCTLARR Act’s provisions (by virtue of the 2015 Order making them applicable to Fourth-Schedule enactments), the s.96 exemption follows “as a necessary corollary” — and that denying the benefit to landowners under Fourth-Schedule enactments (which include both the National Highways Act and the Railways Act) would be discriminatory and violative of Article 14, following Tarsem Singh. The ruling arose on facts involving compensation paid by NHAI, but its reasoning applies equally to Railways Act acquisitions, since both statutes occupy the same position in the Fourth Schedule. Bombay HC and Karnataka HC decisions on the related TDS question (Part 3.3 below) point the same way.

This is now well-supported authority rather than an open question, though it remains a High Court (not Supreme Court) decision and could in principle be tested further. A tax adviser should confirm there is no subsequent departmental circular or appellate development narrowing it before relying on it in a specific matter.

Cross-reference — Spoke 5 (the 2015 Removal of Difficulties Order). The mechanics, effective date and reach of the 2015 Order — and the parallel MoRTH guidelines of 28 December 2017 applying the First Schedule to National Highways acquisitions — are treated in detail in Harmonising Compensation across Special Acts: The 2015 Order and Tarsem Singh (Spoke 5). This article draws on that analysis for the taxation consequence.

3. The Harder Question: Are the Additional Amount and Interest on Land Acquisition Compensation Taxable?

Here we must be candid. The compensation is one thing; the interest on delayed payment is another, and courts and tax authorities have long drawn a distinction between the two.

3.1 The two interest heads under the 2013 Act

The 2013 Act itself creates two amounts that are, in economic substance, compensation for delay:

• Section 30(3) — the “additional amount”: an additional amount of 12% per annum on the market value, computed for the period from the date of the preliminary notification (s.11(1)) to the date of the award or of taking possession, whichever is earlier. This is described in the statute as an additional amount, and it is folded into the award itself.
• Section 80 — interest on delayed deposit: where the awarded amount is not paid or deposited on or before taking possession, interest at 9% per annum runs from the date of taking possession, rising to 15% per annum for any period beyond one year.

The s.30(3) additional amount and s.80 interest are conceptually different from the market value and solatium. The market value (s.26) and solatium (s.30) compensate for the land taken and the compulsory nature of the taking — they are, in the classic characterisation, capital receipts standing in place of the land. The s.30(3) additional amount and s.80 interest, by contrast, compensate for the time value of money withheld — they accrue with the passage of time and look, in substance, like a return on the delayed sum.

3.2 The distinction courts and tax authorities have drawn — at the level of principle

The following can now be said with reasonable confidence, drawing on CBDT guidance and reported case law:

• The compensation proper (market value, and the components that make up the value of what was taken) is treated as a capital receipt, and, for 2013-Act acquisitions, carries the 96 exemption on top.
• Interest on delayed payment has frequently been treated by the revenue as income — a receipt in the nature of a return for the deprivation of money over time — rather than as part of the capital compensation. On this view, the interest component may fall outside the capital-receipt characterisation and may be brought to tax as income, notwithstanding that the underlying compensation is exempt.

Two threshold points can now be stated with confidence. First, CBDT Circular No. 36/2016 (dated 25 October 2016) has settled that land acquisition compensation exempt under s.96 is not taxable under the Income-tax Act, 1961 even though the Income-tax Act contains no express exemption of its own — and this is binding on all subordinate tax authorities under s.119 of the Income-tax Act. Second, the exemption is wider than the Income-tax Act’s own agricultural-land exemptions: rural agricultural land already falls outside the definition of “capital asset” under s.2(14), and urban agricultural land has its own exemption under Section 10(37) (available to individuals/HUFs, conditional on two years’ prior agricultural use and compulsory acquisition on or after 1 April 2004) — but s.96, per the Circular, applies to both agricultural and non-agricultural land without distinction.

The genuinely unresolved question is narrower, and it concerns the interest / additional-amount component specifically:

• Two lines of authority exist, and the honest position is that this is genuinely unsettled for RFCTLARR-Act interest specifically. One line, addressing interest under the 1894 Act’s28/34 (analogous, but not the same provision as s.30(3)/s.80 of the 2013 Act), holds such interest taxable as “Income from Other Sources” under Section 56(2)(viii) (inserted by the Finance (No. 2) Act, 2009, with a 50% deduction under Section 57(iv)): the Delhi High Court in PCIT v. Inderjit Singh Sodhi (HUF), ITA 769/2023 (8 April 2024), and the Punjab & Haryana High Court in Mahender Pal Narang v. CBDT, (2020) 423 ITR 13 (whose SLP the Supreme Court dismissed on 4 March 2021), both so hold, and are now widely followed by ITAT benches. The older Supreme Court decision in CIT v. Ghanshyam (HUF), (2009) 315 ITR 1, which had treated such interest as part of enhanced compensation, is generally treated as superseded by the 2010 amendment for later years.
• The other line addresses RFCTLARR-Act interest directly — and reaches the opposite result. A Chennai ITAT ruling in October 2025 (following Malini v. ACIT on similar facts) held that interest on enhanced compensation under the 2013 Act “forms part of the compensation” and is exempt under s.96, reasoning that s.96’s language is broader than the general Income-tax Act interest provisions and displaces them for RFCTLARR-governed receipts. This is a single-member Tribunal decision — lower in the hierarchy than the High Court rulings above — but it is, on the research available to this firm, the only authority actually deciding this question for RFCTLARR-Act interest, rather than by analogy from the 1894 Act.

A reasonable argument can be made for the exempt position: given that the Sodhi and Narang line does not directly address the s.96 argument, and that the one decision squarely on RFCTLARR interest went the other way, a claimant should not simply concede that the interest is taxable. The case for treating s.96’s language as broad enough to cover interest as part of the compensation package draws support from the Chennai ITAT’s reasoning and from the CBDT’s own description of s.96 as wider than ordinary Income-tax Act exemptions — but this is one reading of a genuinely contested point, not a statement of settled law, and readers should treat it as a starting point for their own advice rather than a conclusion.

• The year of taxability is, by contrast, settled: under Section 145B(1) of the Income-tax Act, interest on compensation or enhanced compensation is deemed to be the income of the year in which it is received, not the year(s) to which it economically relates.

3.3 TDS: expect deduction at source on the interest

As a practical matter, the deducting authority (the Collector, the Competent Authority under the NH/Railways mechanism, or the arbitrator’s award-implementing office) will often apply tax deduction at source on disbursement, even where the compensation itself is treated as exempt. This can now be addressed with reasonable precision.

Compensation itself is governed by Section 194LA of the Income-tax Act — 10% TDS on compensation for compulsory acquisition of immovable property (other than agricultural land) exceeding the prescribed threshold (₹2,50,000 up to 31 March 2025; ₹5,00,000 thereafter). But the second proviso to s.194LA expressly excludes any payment made in respect of an award or agreement exempted under s.96 of the RFCTLARR Act. This exclusion has been enforced by the courts: the Bombay High Court has held that NH Act compensation under s.3G(5) cannot be subjected to TDS because s.96 exempts it; the Karnataka High Court has confirmed the same for NH Act compensation post-1 January 2014; and the reasoning aligns with the Chhattisgarh High Court‘s position in Sanjay Kumar Baid discussed in Part 2. In principle, therefore, no TDS should be deducted on s.96-exempt compensation under s.194LA.

In practice, deducting authorities frequently withhold anyway, out of administrative caution or uncertainty about the classification of a given acquisition — so a landowner should not assume the exemption will be self-executing at the point of payment. Where TDS is deducted under s.194LA despite s.96 applying, the amount is recoverable by claiming credit or refund in the income-tax return. Interest income (as distinct from the compensation) may separately attract TDS under other provisions applicable to “income from other sources”, consistently with the s.56(2)(viii) characterisation discussed in Part 3.2 — and, given the unresolved tension identified there, the correct TDS treatment of the interest component specifically should still be confirmed with a tax adviser on the facts of the disbursement. A landowner should not treat a TDS deduction as conclusive of taxability; nor should he assume the exemption automatically prevents deduction at source in practice.

4. Practical guidance: what to do, and what to verify

For a landowner or adviser receiving an enhanced award, the responsible sequence is:

1. Identify the components. Break the receipt into market value, s.28/s.29 heads, s.30 solatium, s.30(3) additional amount, and s.80 interest (and, for pre-2015 NH acquisitions, solatium and interest flowing from the Tarsem Singh line — see Spoke 1). You cannot analyse taxability of a lump sum.
2. Apply s.96 to the compensation. For a 2013-Act award (and, on the reasoning above, for NH/Railways compensation computed on the First-Schedule scale via the 2015 Order), the compensation proper carries the s.96 exemption from income tax and stamp duty.
3. Understand the interest position — and that it is genuinely contested. The compensation, NH/Railways applicability, year of taxability and TDS position are addressed with citations above. On the s.30(3) additional amount and s.80 interest, authority is split between the Sodhi/Narang line (taxable under s.56(2)(viii)/57(iv), decided under the 1894 Act) and a Chennai ITAT ruling deciding the RFCTLARR-specific question the other way (exempt under s.96). Take a considered position on your facts rather than assuming either result by default.
4. Reconcile TDS. Match any tax deducted at source against the correct legal position, and claim credit or refund accordingly.

Key takeaways

• Section 96 of the RFCTLARR Act, 2013 exempts an award or agreement compensation (other than under s.46) from income tax and stamp duty. This is verified land-acquisition law.
• Through 105(3), s.113 and the RFCTLARR (Removal of Difficulties) Order, 2015 (dated 28-08-2015, effective 01-01-2015), the compensation benefits of the 2013 Act’s First, Second and Third Schedules were extended to the Fourth-Schedule enactments, including the National Highways Act, 1956 and the Railways Act, 1989. Compensation for NH/Railways acquisitions computed on that scale is best read as travelling with the s.96 exemption.
• The interest / additional-amount component — the 30(3) 12% additional amount and s.80 interest (9%, rising to 15% after one year) — stands on a different footing. Courts and tax authorities have drawn a distinction between compensation (capital, exempt) and interest on delayed payment (often treated as income).
• The NH/Railways applicability, year of taxability, agricultural-land interaction and TDS position are addressed above with citations (CBDT Circular 36/2016, Sanjay Kumar Baid v. ITO (Chhattisgarh HC, 2025), Sections 145B(1), 10(37) and 194LA). On the interest component, authority is genuinely split: the Sodhi/Narang line (1894-Act interest, by analogy) treats Land Acquisition Compensation as taxable under Section 56(2)(viii)/57(iv), while a Chennai ITAT ruling decides the RFCTLARR-specific question the other way, treating it as exempt under s.96. Our reasoned view favours the latter; the point remains unsettled.

Frequently asked questions

Q1. Is my land acquisition compensation taxable?

For an acquisition under the RFCTLARR Act, 2013, land acquisition compensation is not taxable because Section 96 exempts the award or agreement compensation (other than under Section 46) from income tax and stamp duty. The land acquisition compensation proper—market value and the components valuing what was taken, including solatium—is within that exemption. The interest component is a separate question (see Q3).

Q2. I was acquired under the National Highways Act, not the 2013 Act. Do I still get the exemption?

Where your compensation was computed on the 2013 Act’s First-Schedule scale — which applies to National Highways acquisitions through the 2015 Removal of Difficulties Order (and the MoRTH guidelines of 28-12-2017) — yes. The Chhattisgarh High Court has directly held, in Sanjay Kumar Baid v. Income Tax Officer (2025), that the s.96 exemption follows the compensation once it is determined under RFCTLARR standards, and that denying it to NH Act or Railways Act acquisitions would be discriminatory under Article 14. This is now well-supported authority, though as a High Court (not Supreme Court) ruling it is sensible to have a tax adviser confirm there has been no subsequent narrowing before relying on it in a specific case.

Q3. What about the 12% additional amount and the interest on delay — are those exempt too?

Two lines of authority point in different directions, and this is honestly unsettled. Cases addressing interest under the 1894 Act — Sodhi (Delhi HC, 2024) and Mahender Pal Narang (P&H HC, SLP dismissed by the Supreme Court) — treat such interest as taxable “Income from Other Sources” under Section 56(2)(viii), with a 50% deduction under Section 57(iv). But the one ruling actually deciding this question for RFCTLARR Act interest specifically — a Chennai ITAT decision, October 2025 — held it exempt under s.96, as part of the compensation. A reasonable argument favours the latter, since s.96’s language is broader than the ordinary Income-tax Act exemptions and the Chennai ruling engages directly with the point the older cases don’t address — but this is one reasoned reading of a genuinely open question, not settled law, and it’s worth getting a second opinion before relying on it. The year of taxability, at least, is settled either way — interest is taxed in the year received, under Section 145B(1).

Q4. TDS Was Deducted from My Land Acquisition Compensation Award. Does That Mean It Is Taxable?

Not necessarily. The second proviso to Section 194LA of the Income-tax Act specifically exempts land acquisition compensation covered by Section 96 of the RFCTLARR Act from TDS, and the Bombay and Karnataka High Courts have both enforced that exemption against deducting authorities. If TDS was deducted from the compensation awarded for the compulsory acquisition of your land despite Section 96 applying, it is generally recoverable by claiming credit or a refund in your income-tax return. The position is different for the interest component. Whether TDS on interest is correctly deductible depends on the unresolved question of whether such interest is taxable or exempt under Section 96 (see Q3). If the interest is ultimately exempt, any TDS deducted from it should likewise be recoverable. If it is taxable income, the deduction may be correctly made. This is worth disputing on the facts if the amounts involved are significant.

Sources & authorities

Statutory provisions and instruments (from the verified authority set for this series):

• RFCTLARR Act, 2013 — s.11(1) (preliminary notification), s.23 (award), s.26 (market value), s.28 (parameters), s.29 (value of assets), s.30 (solatium) and 30(3) (additional 12% p.a.), s.80 (interest 9% p.a., 15% after one year), s.96 (income-tax and stamp-duty exemption), s.105 & s.105(3) (Fourth-Schedule enactments), s.113 (power to remove difficulties); Schedules — First, Second, Third, and Fourth (thirteen enactments).
• RFCTLARR (Removal of Difficulties) Order, 2015, dated 28-08-2015 (u/s 113(1) r/w s.105(3)), effective 01-01-2015 — extending First/Second/Third Schedule benefits to the Fourth-Schedule enactments, including the National Highways Act, 1956 and the Railways Act, 1989.
• MoRTH guidelines dated 28-12-2017 — First Schedule of the RFCTLARR Act to apply to National Highways acquisitions.
• National Highways Act, 1956 and Railways Act, 1989 — Fourth-Schedule enactments.
• Income-tax Act, 1961 — s.2(14) (capital asset), s.10(37) (urban agricultural land exemption), s.56(2)(viii) and s.57(iv) (interest on compensation, inserted by the Finance (No. 2) Act, 2009), s.119 (binding effect of CBDT circulars), s.145B(1) (year of taxability), s.194LA and its second proviso (TDS and s.96 exclusion).
• CBDT Circular No. 36/2016, dated 25 October 2016 — compensation exempt under s.96 of the RFCTLARR Act not taxable under the Income-tax Act, 1961, regardless of agricultural/non-agricultural classification.
• Sanjay Kumar Baid v. Income Tax Officer, Chhattisgarh High Court, 2025:CGHC:47243-DB (15 September 2025), TAXC No. 176 of 2025 — s.96 exemption applies to National Highways Act compensation via the 2015 Order; denial would violate Article 14.
• PCIT v. Inderjit Singh Sodhi (HUF), Delhi High Court, ITA 769/2023 (8 April 2024) — interest on compensation/enhanced compensation taxable under s.56(2)(viii)/57(iv); followed by numerous 2025-2026 ITAT benches.
• Mahender Pal Narang v. CBDT, (2020) 423 ITR 13 (P&H) — same position; SLP dismissed by the Supreme Court, 4 March 2021, (2021) 279 Taxman 74 (SC).
• CIT v. Ghanshyam (HUF), (2009) 315 ITR 1 (SC) — earlier position treating such interest as part of enhanced compensation (capital gains); generally treated as superseded for years after the 2010 amendment (s.56(2)(viii)/57(iv)/145A-145B) took effect.
• Chennai ITAT ruling (October 2025, following Malini v. ACIT) — interest on enhanced compensation held to form part of exempt compensation under s.96 of the RFCTLARR Act, contrary to the Sodhi line; single-member bench, RFCTLARR-specific.

All authorities independently verified on 20 July 2026.

This article is for general information only and does not constitute legal advice. It addresses the law as at the date of writing and may not reflect subsequent developments. The taxation of land acquisition compensation and interest is fact-specific: the correct treatment turns on the acquiring statute, the components of the particular award, and the income-tax provisions in force for the relevant assessment year, and requires the advice of a qualified tax adviser. For advice on a specific matter, please consult Bhatt & Joshi Associates or your tax adviser.

The post Is Land Acquisition Compensation Taxable? Section 96, Interest & TDS Explained appeared first on Bhatt & Joshi Associates.

When land is acquired for a National Highway, the landowner does not receive a court-determined compensation in the first instance. The Competent Authority fixes compensation under Section 3G of the National Highways Act, 1956, and if the landowner is dissatisfied, the dispute goes to an arbitrator appointed by the Central Government under Section 3G(5). The Arbitration and Conciliation Act, 1996 governs those proceedings by virtue of Section 3G(6). For a landowner seeking to challenge a National Highways arbitral award, Section 34 of the Arbitration and Conciliation Act, 1996 provides the only judicial remedy after the arbitrator has made an award—and that door is narrow. The consequence is decisive and frequently underappreciated.

This article explains, for the practitioner and the affected landowner alike, exactly how narrow. There are three constraints that together define the outer boundary of what a Section 34 court can do with a National Highways award: a strict and unforgiving limitation clock; a merits window confined to “patent illegality” rather than a re-hearing on evidence; and, most consequentially, a bar on modification — the court may set the award aside, but it cannot raise a low figure to a fair one. Understanding these limits is not an academic exercise. It dictates that the real battle over market value must be fought and won before the arbitrator, because the supervisory court will not repair an under-valuation for you.

This is the fourth spoke in a nine-part series on fair compensation in Indian land acquisition; see Fair Compensation in Indian Land Acquisition: LARR, Railways and National Highways — A Practitioner’s Map for the full map. This article’s central limit — the s.34 ceiling — is the flip side of the forum comparison in Three Forums for Enhancement — s.64 Reference, NH Arbitration and the Railways Act (Spoke 3).

Why Section 34 Is the Only Route to Challenge a National Highways Arbitral Award

Under the National Highways Act, compensation is determined by the Competent Authority under Section 3G, and a disagreement on the amount is referred to arbitration under Section 3G(5). Section 3G(6) makes the Arbitration and Conciliation Act, 1996 applicable to that arbitration. That single cross-reference imports the entire architecture — and the entire limitations — of Section 34 into highways compensation litigation.

Section 34 is not an appeal. It is a supervisory jurisdiction to set aside an award on limited grounds. A litigant who approaches it expecting the court to re-open the valuation, re-weigh the sale deeds, and substitute a higher figure has misunderstood the remedy. The three sections that follow set out what the court will, and will not, do.

1. The limitation clock: strict, short, and “but not thereafter”

The first and most common reason why a challenge to a National Highways arbitral award under Section 34 fails is that it is filed too late. Section 34(3) prescribes a period of three months from the date on which the party received the arbitral award, extendable by a further thirty days on sufficient cause—and then adds the words “but not thereafter”.

Those three words have been read literally and repeatedly by the Supreme Court.

No extension beyond the thirty-day proviso. In Union of India v. Popular Construction Co., (2001) 8 SCC 470, the Supreme Court held that the phrase “but not thereafter” in Section 34(3) excludes the operation of Section 5 of the Limitation Act, 1963. Delay beyond the three months plus thirty days is not condonable. The outer limit is genuinely an outer limit.

Section 5 of the Limitation Act does not apply. This was reaffirmed in Simplex Infrastructure Ltd. v. Union of India, (2019) 2 SCC 455, where the Court confirmed that Section 5 of the Limitation Act does not apply to a Section 34 application and that the thirty-day proviso is the outer limit. There is no general power to condone delay on equitable grounds.

Neither does Section 17. A litigant who discovers a ground late — say, on learning of some concealment — cannot invoke Section 17 of the Limitation Act to postpone the starting point. In P. Radha Bai v. P. Ashok Kumar, (2019) 13 SCC 445, the Supreme Court held that there is no condonation beyond the further thirty days and that Section 17 of the Limitation Act does not extend the Section 34(3) period. The clock is not merely strict as to its length; it is strict as to when it starts.

The clock runs from the signed copy. And when does it start? Not from an informal intimation, a draft, or an unsigned communication. In State of Maharashtra v. ARK Builders Pvt. Ltd., (2011) 4 SCC 616, the Court held that limitation under Section 34(3) runs from receipt of the signed copy of the award under Section 31(5) of the 1996 Act. The signed copy is the trigger.

The practical lesson is unambiguous. The single most important date in a National Highways challenge is the date on which the claimant received the signed copy of the award. That date must be captured contemporaneously and diarised, because three months and thirty days later the remedy is gone, and no court can bring it back.FF

2. The merits window: patent illegality, not re-appreciation

Suppose the challenge is filed in time. What can the court actually examine? For a domestic award — which a Section 3G(5) highways award is — Section 34(2A) permits setting aside on the ground of “patent illegality” appearing on the face of the award.

The leading exposition is Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131. There the Supreme Court explained the scope of patent illegality under Section 34(2A): a finding based on no evidence at all, or one that ignores vital evidence, is patently illegal and may be set aside. But — and this is the boundary — the court cannot re-appreciate evidence. It cannot re-weigh the comparable sales, prefer one exemplar over another, or substitute its own valuation for the arbitrator’s merely because a different conclusion was possible.

The distinction matters enormously in valuation disputes. A challenge framed as “the arbitrator wrongly averaged the sale deeds” or “the arbitrator should have accepted our higher exemplar” is an invitation to re-appreciate evidence, and it will fail. A challenge framed as “the arbitrator fixed compensation on no evidence of market value at all,” or “the arbitrator ignored the registered sale deeds on record entirely,” engages the patent-illegality ground and has a fighting chance. The framing is often the difference between a maintainable petition and a hopeless one.

3. The killer limitation: the court cannot modify or enhance

Here is the constraint that reshapes strategy in every National Highways compensation matter. Even where a Section 34 court is persuaded that the award is patently illegal, it cannot rewrite the number.

In Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1, the Supreme Court held that under Section 34 a court may set aside an arbitral award but cannot modify or enhance it — and that this applies squarely to compensation fixed under Section 3G of the National Highways Act. The court has no power to take a grossly low award and simply raise it to what the evidence would justify.

The consequences follow directly. If the arbitrator has fixed compensation at, say, the jantri/guideline rate when registered sale deeds on record show a market value many times higher, the Section 34 court cannot correct that figure. The most a claimant can obtain is a set-aside, and — at best — a fresh arbitration in which the exercise begins again. The court will not hand the landowner the higher figure; it can only send the parties back to square one, with all the delay, cost, and uncertainty that implies.

The strategic fallout: win the valuation before the arbitrator

This is why the evidentiary case on market value must be built and won at the arbitration stage, not saved for the challenge. The tools for that fight — genuine, bona fide, proximate comparable sale deeds; adoption of the highest reliable exemplar rather than a mechanical average; and resistance to jantri/ready-reckoner rates being treated as compensation — are decisive precisely because Section 34 will not deploy them for the claimant afterwards.

The point cannot be overstated. A landowner who under-invests in the arbitration record — who does not file the best sale deeds, does not lead evidence on comparability and adjustments, does not object on the record to the arbitrator’s reliance on guideline rates — cannot expect the supervisory court to make up the difference. The court’s hands are tied by M. Hakeem. The evidentiary battle is won or lost before the arbitrator.

Contrast: the LARR Section 64 route re-determines on merits

It is instructive to compare the National Highways position with the reference mechanism under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. Where an acquisition proceeds under the 2013 Act, a claimant dissatisfied with the Collector’s award may seek a reference under Section 64, and the Land Acquisition, Rehabilitation and Resettlement Authority determines the compensation afresh under Section 69. That is a determination on the merits: the Authority re-examines market value, applies the statutory parameters, and can enhance the award.

The National Highways claimant has no equivalent merits forum after the arbitrator. The arbitrator is the merits forum, and the only supervisory review — Section 34 — cannot re-determine value or enhance the figure. The structural difference between the two regimes is treated in detail in Three Forums for Enhancement — s.64 Reference, NH Arbitration and the Railways Act (Spoke 3). The practical takeaway is that the highways landowner carries a heavier evidentiary burden earlier, because there is no second bite on the merits.

A practitioner’s compliance checklist

1. Capture the signed-copy date. Record, contemporaneously and in writing, the date the claimant received the signed copy of the award under Section 31(5). This is the limitation trigger under ARK Builders.
2. Diarise three months plus thirty days — and treat it as absolute. Under Popular Construction, Simplex Infrastructure and Radha Bai, there is no condonation beyond the thirty-day proviso and no Section 5 or Section 17 relief. File within time or not at all.
3. Build the record before the arbitrator. File the best comparable sale deeds, lead evidence on market value, and object on the record to any reliance on jantri/guideline rates. Because the court cannot modify under Hakeem, the arbitration record is the whole game.
4. Frame the challenge as patent illegality / no evidence — never as re-appreciation. Under Ssangyong, plead that the award rests on no evidence or ignores vital evidence on record. Do not ask the court to re-weigh exemplars; it will not.
5. Advise the client realistically on the outcome. The best-case result of a successful Section 34 petition is a set-aside and a fresh arbitration — not a court-enhanced figure. Set expectations accordingly.

Key takeaways

• A NHAI compensation award is made by an arbitrator under Section 3G(5); the only challenge is Section 34 of the Arbitration and Conciliation Act, 1996, and it is a narrow supervisory remedy, not an appeal.
• Limitation is strict: three months plus a further thirty days under Section 34(3), “but not thereafter,” running from receipt of the signed copy of the award. Section 5 and Section 17 of the Limitation Act do not extend it.
• On merits, the court may set aside only for patent illegality under Section 34(2A) — no evidence, or ignoring vital evidence — and cannot re-appreciate the evidence.
• Critically, under Hakeem the court cannot modify or enhance the award. A grossly low Section 3G figure cannot be corrected by the court; the most a claimant gets is a set-aside and, at best, a fresh arbitration.
• The valuation case must therefore be won before the arbitrator. Unlike the LARR Section 64 reference, there is no merits forum after the arbitrator to re-determine value.

Frequently asked questions

Can I appeal a National Highways arbitral award if I think the compensation is too low?

There is no appeal on merits. The only remedy is a Section 34 application to set aside the award, and it is confined to limited grounds. The court cannot simply re-value the land and award you more; under Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1, it cannot modify or enhance the award at all.

What is the time limit to challenge a National Highways arbitral award under Section 34?

Three months from receipt of the signed copy of the award, plus a further thirty days on sufficient cause — and no more. The words “but not thereafter” in Section 34(3) have been held to exclude any further extension: see Union of India v. Popular Construction Co., (2001) 8 SCC 470, and Simplex Infrastructure Ltd. v. Union of India, (2019) 2 SCC 455.

The clock started before I even had a proper copy of the award — is that fair?

Limitation runs from receipt of the signed copy of the award under Section 31(5), as held in State of Maharashtra v. ARK Builders Pvt. Ltd., (2011) 4 SCC 616. An informal or unsigned intimation does not start the clock; the signed copy does. Capture that date carefully, because P. Radha Bai v. P. Ashok Kumar, (2019) 13 SCC 445, confirms there is no relief for a late-discovered ground.

If the court sets the award aside, do I automatically get more compensation?

No. A successful challenge results, at best, in the award being set aside and the matter going back to fresh arbitration. The court will not itself award a higher figure. That is precisely why the evidentiary case on market value must be established before the arbitrator in the first place.

Sources & authorities

• National Highways Act, 1956 — Sections 3G, 3G(5), 3G(6) (arbitration and application of the 1996 Act)
• Arbitration and Conciliation Act, 1996 — Sections 31(5) (signed copy), 34 (setting aside), 34(2A) (patent illegality), 34(3) (limitation: three months plus thirty days, “but not thereafter”)
• RFCTLARR Act, 2013 — Sections 64 (reference) and 69 (determination by the Authority)
• Union of India v. Popular Construction Co., (2001) 8 SCC 470
• State of Maharashtra v. ARK Builders Pvt. Ltd., (2011) 4 SCC 616
• Simplex Infrastructure Ltd. v. Union of India, (2019) 2 SCC 455
• Radha Bai v. P. Ashok Kumar, (2019) 13 SCC 445
• Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131
• Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1

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Compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (“the 2013 Act” or “LARR Act”) is not a single figure plucked from a valuation report. It is an architecture — a set of statutory heads that are computed in a fixed sequence, and which compound upon one another.

Understanding that sequence matters because two of the heads — the multiplier factor and the 100% solatium — operate as multipliers, not mere additions. The order in which they are applied is therefore not academic; it determines whether a landowner receives roughly twice, or closer to four times, the bare market value of the land.

This article walks through the build-up head by head, offers a clean worked illustration on round hypothetical numbers, and explains why the LARR Act, 2013 architecture routinely produces two to three times the outcome that the old Land Acquisition Act, 1894 delivered — an architecture that, after 2015, now governs even National Highways and Railways acquisitions.

This is the first spoke in a nine-part series on fair compensation in Indian land acquisition; see Fair Compensation in Indian Land Acquisition: LARR, Railways and National Highways — A Practitioner’s Map for the full map across all three statutes.

Head 1 — Market value under Section 26

Everything begins with market value, fixed under Section 26 of the LARR Act, 2013. The Collector determines it as the higher of the following, whichever yields more to the landowner:

• Section 26(1)(a) — the market value, if any, specified in the Indian Stamp Act, 1899 for the registration of sale deeds in the area, i.e. the jantri / ready-reckoner (guideline) value; or
• Section 26(1)(b) — the average sale price for similar type of land situated in the nearest village or vicinity, worked out from the sale deeds registered in the preceding three years; or
• the consented amount, where land is acquired under s.11 by agreement or for private companies / PPP with consent.

The Explanation to s.26 refines s.26(1)(b): the “average sale price” is ascertained by taking one-half of the total number of sale deeds in which the highest prices have been mentioned — that is, the top 50% of exemplars — and averaging those. Low-value distress or collusive sales in the bottom half are thereby excluded, so the average is pulled upward toward genuine market prices.

A recurring litigation point is the status of the jantri figure. The jantri is a floor, not a ceiling: because s.26 mandates the higher of (a) and (b), a robust set of sale deeds under (b) will displace a stale guideline value. But the jantri is not to be treated as proof of true market value in its own right — guideline registers have “no statutory base” for fixing compensation and ready-reckoner rates are struck for stamp duty, not acquisition (Jawajee Naganatham v. Revenue Divisional Officer, (1994) 4 SCC 595). Equally, s.26(1)(b) cannot be computed off a single deed of dissimilar land; multiple comparable deeds are required, failing which the court falls back to s.26(1)(a) (Project Director, NHAI v. Alfa Remidis Ltd., 2026 INSC 480).

Head 2 — The multiplier factor: Section 26(2) and the First Schedule

Once the base market value under s.26(1) is fixed, Section 26(2) read with the First Schedule applies a multiplier factor to it:

• 00 for land acquired in urban areas; and
• a factor rising up to 00 for land in rural areas, graded by distance of the project from the urban centre (the greater the distance, the higher the factor, subject to the 2.00 ceiling).

This is the first of the two compounding steps. The multiplier is applied to the market value before solatium is added, so a rural claimant at factor 2.00 already sees the s.26 value doubled at this stage.

Head 3 — Value of assets attached to the land: Sections 29 and 28

Land is rarely bare. Section 29 requires the Collector to separately assess and add the value of things attached to or standing on the land — trees, plants, standing crops, houses, buildings and other immovable structures, and wells. These are valued on their own footing (replacement/market value of the asset) and added to the compensation; Section 28 lists the assessment of standing crops and trees among the mandatory parameters the Collector must take into account.

The asset value is added to the market-value-times-factor figure to arrive at the total compensation on which solatium is then computed.

Head 4 — Damage: severance and injurious affection under Section 28

Where only part of a holding is taken, the acquisition may damage the remaining land — by cutting it off (severance) or by reducing its utility or value (injurious affection). Section 28 directs the Collector to take into account the damage sustained by reason of severing the acquired land from the owner’s other land, the injurious affection to other property (movable or immovable) or earnings, and the diminution of profits between notification and possession.

These are genuine, separately compensable heads and can be substantial where a linear project — a highway or a canal — slices through a field. Because the quantification of severance and injurious affection raises distinct valuation questions, this series addresses them in depth in spoke 7; here it is enough to record that they sit within the s.28 parameters and add to the corpus before solatium.

Head 5 — Solatium at 100%: Section 30 and the First Schedule

Section 30, read with the First Schedule, awards solatium equal to one hundred per cent (100%) of the compensation amount. Solatium is the statutory recognition of the compulsory nature of the acquisition — the owner is being made to part with land against his will — and it is calculated on the aggregate of the preceding heads (market value × factor, plus assets, plus damage).

This is the second, and larger, compounding step. Because solatium is 100% and is computed on a base that already includes the doubled rural market value and the asset/damage heads, it effectively doubles the entire corpus built up so far.

Head 6 — Additional amount of 12% per annum: Section 30(3)

Section 30(3) grants an additional amount calculated at twelve per cent (12%) per annum on the market value, for the period from the date of the preliminary notification under Section 11 until the date of the award or the date of taking possession, whichever is earlier.

This head compensates the owner for the time value of the land during the pendency of the acquisition process. It is computed on the market value (as fixed under s.26) for the notification-to-award/possession interval and added to the corpus.

Head 7 — Interest on delayed payment: Section 80

Finally, Section 80 deals with delay in actually paying the compensation after possession. Where the awarded amount is not paid or deposited on or before taking possession, interest runs:

• at 9% per annum from the time of taking possession until payment; and
• at 15% per annum for any period beyond one year from the date of taking possession until payment.

Section 80 interest is distinct from the s.30(3) additional amount: the latter runs up to award/possession, the former runs after possession until the money actually reaches the owner. Together they ensure the State bears the cost of delay at both ends of the process.

A worked illustration of the build-up

The numbers below are illustrative only, chosen as round figures to expose how the multiplier and solatium compound. They are not a valuation of any real acquisition.

Assume a rural parcel of 1,000 sq. m with a determined market value of Rs 2,000 per sq. m under s.26, a distance-based factor of 2.00, trees and a well worth Rs 5,00,000, and severance damage of Rs 3,00,000. Assume the s.11 notification preceded the award by 1 year.

On these figures a bare market value of Rs 20,00,000 becomes a total award of roughly Rs 1.008 crore — about five times the raw land value on these particular assumptions, driven chiefly by the interaction of the 2.00 factor and the 100% solatium. Section 80 interest (9%, rising to 15% after a year) would be added on top of this only if the amount were not paid on possession — it is not part of the award figure itself.

Note the order: solatium at Step 5 is charged on the already-doubled, asset-inclusive corpus of Step 4, which is why the two multiplicative heads reinforce each other rather than merely adding.

Why this doubles or triples the 1894-Act outcome

Under the Land Acquisition Act, 1894, the compensation heads were market value under s.23(1) (with severance and injurious affection), solatium at 30% under s.23(2), and interest under s.28. The LARR Act, 2013 changes the arithmetic at two decisive points:

1. It introduces the multiplier factor (up to 2.00 in rural areas) that has no equivalent in the 1894 Act — an entirely new step that can double the market-value base before anything else is added; and
2. It raises solatium from 30% to 100%, and charges it on that enlarged base.

The combined effect of a fresh doubling step and a solatium rate more than three times higher is what produces awards that are, in rural cases, commonly two to three times (and, as the illustration shows, sometimes more) the equivalent 1894 outcome — before even accounting for the s.26(1)(b) top-50% averaging that tends to lift the market value itself above stale guideline figures.

The same architecture now governs NH and Railways acquisitions

Historically, acquisitions under the National Highways Act, 1956 and the Railways Act, 1989 stood outside this architecture — s.3J of the NH Act expressly excluded the 1894 Act, denying even solatium and interest to highway landowners.

Two developments closed that gap. First, in Union of India v. Tarsem Singh, (2019) 9 SCC 304, the Supreme Court held s.3J of the NH Act unconstitutional insofar as it denied solatium and interest, as violative of Article 14 — so solatium and interest reach even NH-Act land. Second, the RFCTLARR (Removal of Difficulties) Order, 2015 dated 28-08-2015 (issued under s.113(1) read with s.105(3)) extended the compensation, R&R and infrastructure benefits of the First, Second and Third Schedules to the thirteen Fourth-Schedule enactments — expressly including the National Highways Act, 1956 and the Railways Act, 1989 — deemed effective 01-01-2015.

The practical result is that the seven-head architecture described above — market value, multiplier, assets, damage, 100% solatium, 12% additional amount and delay interest — now supplies the compensation standard across highway and railway acquisitions too. Spoke 5 in this series examines that cross-over regime in detail.

Key takeaways

• Compensation under the LARR Act, 2013 is built in a fixed sequence of heads; the order matters because the multiplier and solatium compound.
• Market value (s.26) is the higher of jantri/stamp value (26(1)(a)) or the average of the top 50% of sale deeds over the preceding three years (26(1)(b), Explanation), or the consented amount.
• The multiplier factor (s.26(2), First Schedule) is 1.00 urban and up to 2.00 rural by distance — a step with no 1894-Act equivalent.
• Assets (s.29) — trees, crops, houses, wells, structures — and severance / injurious affection (s.28) are separately added before solatium.
• Solatium is 100% (s.30), computed on the whole corpus, so it effectively doubles it — against just 30% under the 1894 Act.
• A 12% p.a. additional amount (s.30(3)) runs from the s.11 notification to award/possession; s.80 interest (9%, then 15% after a year) runs from possession until payment.
• Post-2015, this architecture governs NH and Railways acquisitions too, following Tarsem Singh and the 2015 Removal of Difficulties Order.

Frequently asked questions

Is the jantri (guideline) value the maximum I can get?

No. Section 26 mandates the higher of the jantri value and the sale-deed average, so a strong set of comparable sale deeds under s.26(1)(b) can — and often does — displace a stale jantri figure. The jantri operates as a floor, not a ceiling.

Does the 100% solatium under the LARR Act, 2013 apply to the land value alone?

No. Solatium under s.30 is charged on the aggregate corpus — market value after the multiplier, plus the value of assets under s.29, plus s.28 damage — which is why it has such a large effect on the final figure.

What is the difference between the 12% additional amount and Section 80 interest?

The 12% p.a. under s.30(3) runs from the s.11 preliminary notification up to the award or possession. Section 80 interest (9% p.a., rising to 15% after one year) runs after possession until the compensation is actually paid. They cover different periods and are both payable where applicable.

Do highway and railway landowners get the same compensation package under the LARR Act, 2013?

Broadly yes. After Tarsem Singh, (2019) 9 SCC 304 and the 2015 Removal of Difficulties Order, the 2013 Act’s compensation schedules extend to National Highways Act and Railways Act acquisitions. Spoke 5 addresses the mechanics.

Sources & authorities

• RFCTLARR Act, 2013 — ss. 11, 26 (incl. 26(1)(a), 26(1)(b) and Explanation), 26(2), 28, 29, 30 and 30(3), 80, 105(3), 113; First, Second, Third and Fourth Schedules
• Land Acquisition Act, 1894 — ss. 23(1), 23(2), 28 (historical baseline)
• National Highways Act, 1956 — s. 3J; Railways Act, 1989 — Chapter IVA
• RFCTLARR (Removal of Difficulties) Order, 2015, dated 28-08-2015 (u/s 113(1) r/w s.105(3)), deemed effective 01-01-2015
• Jawajee Naganatham v. Revenue Divisional Officer, (1994) 4 SCC 595
• Project Director, NHAI v. Alfa Remidis Ltd., 2026 INSC 480
• Union of India v. Tarsem Singh, (2019) 9 SCC 304

All authorities independently verified on 20 July 2026.

This article is general information, not legal advice; for advice on a specific acquisition, consult Bhatt & Joshi Associates.

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After the Removal of Difficulties Order of 2015 and the harmonisation that followed, a landowner acquired under the National Highways Act, 1956 or the Railways Act, 1989 is, in principle, entitled to compensation on the same generous scale as one acquired under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The quantum has been brought broadly into line. Land acquisition compensation enhancement — the route to more — has not.

This is the point most claimants miss, and it is the point that decides cases. Two landowners may be equally under-compensated — the same jantri-driven award, the same ignored sale deeds — and yet one can obtain a full re-determination of value while the other cannot get a rupee more, no matter how plainly the award is wrong on the merits. The difference lies entirely in which statute took the land, because each statute channels the dispute into a different forum, on a different trigger, subject to a very different standard of review.

This article sets the three forums side by side — the s.64 reference under the 2013 Act, the arbitration under s.3G of the National Highways Act, and the arbitration mechanism under Chapter IVA of the Railways Act — and draws out the one structural distinction that should govern strategy from day one: a LARR reference gives you a fresh determination on the merits; an arbitral award, once made, can only be set aside, never enhanced.

This is the third spoke in a nine-part series on fair compensation in Indian land acquisition; see Fair Compensation in Indian Land Acquisition: LARR, Railways and National Highways — A Practitioner’s Map for the full map. The market-value evidence you assemble is what you deploy once you know which of these forums applies to your acquisition — see Determining Market Value in Land Acquisition: The Evidentiary Battleground (Spoke 2).

The three architectures for enhancing land acquisition compensation

(A) RFCTLARR Act, 2013 — reference to the LARR Authority

The 2013 Act is built around a person who is dissatisfied but has not accepted. Once the Collector makes the award under s.23, a person interested who has not accepted it may apply to the Collector under s.64 to refer the dispute to the Land Acquisition, Rehabilitation and Resettlement Authority constituted under s.51. The matters that may be referred are broad: the measurement of the land, the amount of the compensation, the persons to whom it is payable, and the apportionment of the compensation among the persons interested.

The reference is not a mere appeal on the record. Under s.69, the Authority determines the compensation afresh — it holds its own enquiry and makes its own award, applying the market-value machinery of s.26 (the higher of jantri under s.26(1)(a) and the average of the top-50% sale deeds under s.26(1)(b)), the parameters in s.28, the value of assets under s.29, and the solatium and additional components in s.30. This is a full merits re-determination. From the Authority’s award, an appeal lies to the High Court under s.74.

Because the reference under s.69 turns on the same parameters in s.28, it is also the forum in which severance, injurious affection and other frequently-omitted heads must be affirmatively claimed — the subject of The Heads Owners Forget: Severance, Injurious Affection and Partial Taking (Spoke 7).

Two features deserve emphasis. First, there is no arbitration under the 2013 Act at all — the dispute-resolution architecture is Collector → LARR Authority → High Court, a judicial and quasi-judicial chain throughout. Second, the right to seek a reference is hedged by a strict limitation under s.64. A person who has received the award must apply within the period prescribed by s.64 — described qualitatively, a short outer window running from the award or from notice of it. A claimant who accepts the award, or who lets the s.64 period lapse, forfeits the reference altogether. The discipline of the clock is as important here as the merits.

(B) National Highways Act, 1956 — arbitration under s.3G(5)

The National Highways Act runs on a wholly different logic. Compensation is first determined by the Competent Authority under s.3G. If either party — the landowner or the acquiring authority — is dissatisfied with that determination, the dispute does not go to a court. It goes to an arbitrator appointed by the Central Government under s.3G(5), and by force of s.3G(6) the Arbitration and Conciliation Act, 1996 governs those proceedings.

That structural fact carries a criticism that a claimant should understand before entering the process: the arbitrator is appointed by the Central Government, which is, in substance, the party on the acquiring side. The neutrality that the Arbitration and Conciliation Act presumes sits uneasily with a mechanism in which one side names the tribunal. The 2015 harmonisation and the MoRTH guidelines of 28 December 2017 have raised the substantive compensation payable in NH acquisitions to First-Schedule levels; they have not altered who decides or how the decision is reviewed.

Review of the arbitral award lies under s.34 of the Arbitration and Conciliation Act, 1996 — the setting-aside jurisdiction, discussed in detail in The Limits of Challenging a National Highways Arbitral Award under Section 34 (Spoke 4). For present purposes the critical point is the ceiling on that jurisdiction, taken up below.

(C) Railways Act, 1989 — Chapter IVA and its arbitration

Land taken for a “special railway project” under Chapter IVA (ss.20A–20W) of the Railways Act, 1989 follows a parallel design. Notification is under s.20A, declaration and vesting under s.20E, and compensation is determined by the Competent Authority under s.20F, with an arbitration mechanism provided within the Chapter for a dissatisfied party. Structurally, this mirrors the National Highways route far more closely than the LARR route: an administrative determination followed by arbitration, rather than a reference to a judicial authority.

On quantum, the position was corrected by the RFCTLARR (Removal of Difficulties) Order, 2015 dated 28 August 2015, made under s.113(1) read with s.105(3) of the 2013 Act, which extended the compensation, R&R and infrastructure benefits of the First, Second and Third Schedules to the thirteen Fourth-Schedule enactments — the Railways Act among them — deemed effective 1 January 2015. So RFCTLARR-level compensation now applies to Railways Act acquisitions. As with the National Highways Act, the enhancement of quantum did not change the forum or the standard of review, which remains arbitral.

The distinction that decides cases: re-determination versus setting aside

Here is the fault line. Under the 2013 Act, the LARR Authority, on a s.64 reference, re-determines compensation under s.69. If the Collector’s award was too low — because it leaned on jantri and ignored genuine, proximate sale deeds — the Authority can simply fix the correct, higher figure. That is the ordinary function of the forum.

Under the National Highways Act and the Railways Act, the challenge forum is arbitration followed by s.34. And under s.34 a court has no power to modify or enhance the award. This is settled by Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1, which holds that under s.34 a court may set aside an arbitral award but cannot modify or enhance it, including compensation fixed under s.3G of the NH Act. The court’s grounds are narrow — the setting-aside grounds of s.34, including patent illegality under s.34(2A) for a domestic award, which as Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 explains reaches a finding based on no evidence or one ignoring vital evidence, but does not license a re-appreciation of evidence.

The practical consequence is stark. Suppose the identical error — a Competent Authority or Collector who valued land at guideline rates and disregarded the sale deeds, contrary to Jawajee Naganatham v. Revenue Divisional Officer and the line of authority on comparable sales (examined in full in Spoke 2). Under LARR, the claimant applies under s.64 and the Authority substitutes the correct market value. Under the NH or Railways route, the best the claimant can achieve under s.34 is to have the award set aside — and even then not always with a re-determination in hand, but potentially a remit that starts the arbitral clock afresh. The same under-valuation is far easier to correct under LARR than under the arbitral route, because only the LARR forum is empowered to give the claimant the higher number directly.

This asymmetry should shape expectations at the outset. Where the acquisition is under the 2013 Act, the objective is a merits re-determination and the effort goes into building the comparable-sales case for the Authority. Where the acquisition is under the NH Act or the Railways Act, the claimant’s leverage is at the arbitration stage — because once the arbitral award is made, s.34 offers a demolition tool, not a re-valuation tool.

Which forum, what it means for you

Limitation discipline across the forums

Each forum keeps its own clock, and each clock is unforgiving.

Under the 2013 Act, the right to a reference exists only if the claimant applies to the Collector within the period prescribed by s.64 and has not accepted the award. Miss the window or accept the award, and the reference is gone.

Under the National Highways Act and the Railways Act, once the arbitral award is made the challenge is governed by s.34(3) of the Arbitration and Conciliation Act, 1996 — three months from receipt of the signed copy of the award, extendable by a further thirty days on sufficient cause, “but not thereafter.” The Supreme Court has read those words strictly: Union of India v. Popular Construction Co., (2001) 8 SCC 470 holds that “but not thereafter” excludes s.5 of the Limitation Act; and State of Maharashtra v. ARK Builders Pvt. Ltd., (2011) 4 SCC 616 fixes the start of the clock at receipt of the signed copy of the award under s.31(5). The strictness of that s.34 clock is examined in The Limits of Challenging a National Highways Arbitral Award under Section 34 (Spoke 4); here it is enough to say that the arbitral route punishes delay far more mechanically than the LARR route, and that a claimant who wishes to preserve a challenge must diarise from the date of the signed copy, not from any later or informal intimation.

Key takeaways

• Quantum has converged; forum has not. After the 2015 Removal of Difficulties Order, NH and Railways acquisitions attract RFCTLARR-level compensation, but the machinery for enhancing land acquisition compensation differs fundamentally between the three statutes.
• LARR gives re-determination; NH and Railways give only setting aside. The LARR Authority re-fixes value on the merits under s.69; an NH or Railways arbitral award can only be set aside under s.34, never modified or enhanced (Project Director, NHAI v. M. Hakeem).
• No arbitration under the 2013 Act. The LARR chain is Collector → LARR Authority (s.51/s.64) → High Court (s.74); it is judicial and quasi-judicial throughout.
• The NH arbitrator is appointed by one side. Under s.3G(5) the Central Government — effectively the acquiring party — appoints the arbitrator, a structural feature claimants should weigh.
• The same under-valuation is easier to correct under LARR. Because only the LARR forum can hand the claimant the higher figure, an identical jantri-driven error is far more readily remedied under the 2013 Act than under the arbitral route.
• Every forum has its own unforgiving clock. The s.64 reference window and the s.34(3) challenge period are both strict; missing either is usually fatal.

Frequently asked questions

My land was taken for a National Highway and I think the award is far too low. Can a court simply increase it?

No. Enhancing your land acquisition compensation doesn’t work that way for NH acquisitions: a challenge to a National Highways arbitral award lies under s.34 of the Arbitration and Conciliation Act, 1996, and under Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1 a court may set the award aside but cannot modify or enhance it. Your leverage is therefore at the arbitration stage itself, before the arbitrator appointed under s.3G(5) — that is where the valuation must be won.

Is there any arbitration under the RFCTLARR Act, 2013?

No. The 2013 Act contains no arbitration mechanism. A dissatisfied claimant who has not accepted the s.23 award applies under s.64 for a reference to the LARR Authority (s.51), which determines compensation afresh under s.69, with an appeal to the High Court under s.74.

Why is it said that under-valuation is easier to correct under LARR than under the NH or Railways route?

Because the forums do different things. On a s.64 reference the LARR Authority re-determines value and can award the correct, higher figure directly — a genuine land acquisition compensation enhancement. Under the NH or Railways route the challenge is by arbitration and then s.34, where the court’s power is confined to setting aside on narrow grounds — it cannot substitute a higher figure. The same error thus yields a direct remedy in one forum and, at best, a fresh round in the other.

How much time do I have to challenge, and from when does it run?

For an NH or Railways arbitral award, s.34(3) allows three months from receipt of the signed copy of the award, extendable by thirty days on sufficient cause, “but not thereafter” — a limit the Supreme Court applies strictly (Popular Construction), with time running from the signed copy under ARK Builders. For a LARR reference, you must apply to the Collector within the period prescribed by s.64. In both cases, do not wait.

Sources & authorities

• Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 — ss.23, 26 (incl. 26(1)(a), 26(1)(b)), 28, 29, 30, 51, 64, 69, 74; s.105(3); s.113(1)
• National Highways Act, 1956 — ss.3G, 3G(5), 3G(6)
• Railways Act, 1989 — Chapter IVA, ss.20A, 20E, 20F, 20A–20W
• Arbitration and Conciliation Act, 1996 — ss.31(5), 34, 34(2A), 34(3)
• RFCTLARR (Removal of Difficulties) Order, 2015, dated 28 August 2015 (under s.113(1) r/w s.105(3)) — extending First, Second and Third Schedule benefits to the Fourth-Schedule enactments, deemed effective 1 January 2015
• MoRTH guidelines dated 28 December 2017
• Project Director, NHAI v. M. Hakeem, (2021) 9 SCC 1
• Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131
• Union of India v. Popular Construction Co., (2001) 8 SCC 470
• State of Maharashtra v. ARK Builders Pvt. Ltd., (2011) 4 SCC 616
• Jawajee Naganatham v. Revenue Divisional Officer, (1994) 4 SCC 595

All authorities independently verified on 20 July 2026.

This article is for general information only and does not constitute legal advice. Land acquisition compensation turns on the governing statute, the facts of each acquisition and applicable limitation periods, all of which differ from case to case. Readers should obtain advice specific to their matter before acting. Bhatt & Joshi Associates accepts no liability for reliance on this article without such advice.

The post Three Forums for Land Acquisition Compensation Enhancement in India – s.64 Reference, NH Arbitration and the Railways Act appeared first on Bhatt & Joshi Associates.