Bengaluru: In a development that has stirred concerns among farmers and landowners, the Bangalore Development Authority (BDA) is proceeding with land acquisition for the Bengaluru Peripheral Ring Road (PRR) project, also known as the Bengaluru Business Corridor (BBC), under the 1894 Land Acquisition Act rather than the 2013 Right to Fair Compensation and Transparency in Land Acquisition Act. This decision could subject hundreds of affected landowners to significant tax liabilities on their compensation, leading to widespread anxiety about financial losses.
The PRR project, a 73-kilometer road intended to reduce congestion in Bengaluru by connecting key areas, requires the acquisition of approximately 2,560 acres of land across various parts of the city. However, the BDA’s decision to use the older 1894 Act for this acquisition has raised concerns, as the 2013 Act offers protections, including exemptions from income tax on compensations received. Section 96 of the 2013 Act specifies that compensations received through compulsory acquisitions are exempt from income tax, providing a vital benefit to landowners.
High Court Ruling Intensifies Financial Pressure
The Karnataka High Court recently issued a ruling that reinforces the BDA’s position, stating that tax exemptions under the 2013 Act cannot be extended to acquisitions under the 1894 Act. This ruling essentially means that landowners affected by the PRR project will have to pay income tax on their compensations, categorized as capital gains, under the 1894 Act. The decision has implications not only for the PRR project but also for other state acquisitions by agencies like the Karnataka Industries Area Development Board (KIADB) and the Karnataka Road Development Corporation, which also follow the 1894 Act.
Reduced Compensation and Tax Liabilities: A Double Blow for Landowners
This situation is further exacerbated by recent government actions to reduce the guidance value, or the base property rate used for tax calculations, of lands designated for the PRR project. Although this reduction aims to decrease the BDA’s overall compensation costs, it means affected landowners will receive lower initial compensation. When combined with the tax liabilities, landowners are concerned that the financial outcome of the acquisition process will be substantially less favorable than initially anticipated.
According to financial experts, the total financial hit could exceed 12.5% of the compensation amount due to Tax Deducted at Source (TDS) and other income tax obligations. This percentage could vary based on individual tax situations and capital gains tax implications. For some landowners, especially those who rely on agricultural income, this represents a significant reduction in their anticipated compensation.
Call for Legal Changes to Protect Farmers
Legal experts and advocates for farmers’ rights have voiced concerns, urging the government to reconsider its stance. They argue that by proceeding under the 1894 Act, the BDA is disregarding protections that would offer fairer compensation. One suggestion is for the state to issue an ordinance or amend the acquisition framework, mandating that the 2013 Act apply to the PRR project acquisitions. This could potentially relieve landowners of the impending tax burdens and provide them with compensation that more accurately reflects current market rates.
A senior legal expert remarked, “The government cannot be stubborn and play havoc with farmers’ lives. With these changes, landowners may face financial setbacks due to tax liabilities and reduced compensation amounts. Adopting the 2013 Act would provide much-needed relief to the affected landowners and demonstrate a commitment to fair compensation.”
Broader Implications and the Path Forward
The tax implications extend beyond individual financial concerns, potentially impacting community welfare and economic stability in regions where the PRR project will acquire land. Several farmers’ associations have warned that failure to adopt the 2013 Act might prompt widespread resistance to the project.
Meanwhile, LK Atheeq, Chairperson of Bengaluru Business Corridor Ltd, has acknowledged the issue and announced that the implications of the high court ruling on the PRR project will be reviewed with the BDA’s legal team. As the BDA continues the acquisition process, affected landowners are left in a state of financial uncertainty, with hopes for a revised compensation framework that considers both fair market value and tax exemptions.
This case highlights the challenges faced by landowners in infrastructure projects, underscoring the need for legal clarity and fair practices in land acquisition laws. For now, the landowners affected by the PRR project remain in limbo, awaiting further developments that could impact not only their finances but also their trust in government-led land acquisitions.
