Extensive Relief for Farmers: No Road Compensation Tax on Land Compensation from April 2026. In a watershed decision relieving thousands of farmers and landowners across India, the Central Government said income tax payments from National Highway acquisition will be zero from 1 April 2026.
All National Highway bodies are required by the Ministry of Road Transport and Highways to discontinue Tax Deducted at Source (TDS) on such compensation payments. Such a mechanism was applicable to land acquired compulsorily as required by the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act). Landowners of affected land whether agricultural, urban, or non-agricultural will now receive their full compensation amount without tax deductions.
This will also waive stamp duty on such awards and the payout process would become easier and more transparent. But previously, too many landowners were confused about whether compensation for compulsory acquisition would be taxable.
In other instances, highway agencies deducted TDS, leading farmers to ask for refunds or to go to the courts. The new rule has brought an end to years of uncertainty and significantly cut legal disputes. Section 46 of the RFCTLARR Act does not include private land transactions or voluntary land sales.
The former benefit pertains only to compulsory government acquisition. Nearly ₹20,000 crore was paid out to purchase over 10,000 hectares for highway-upgrading projects around the country in FY 2025–26 alone. Such a reform would ensure fairer payments, protect farmers’ income and facilitate the development of infrastructure in India more quickly, experts said. Owners of property will still be advised to disclose exempt income on tax returns and to maintain records of compensation for such purposes.
