Land Acquisition Act 2013: Compensation, Consent and Rehabilitation

When the government takes your land under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act), you get market value times a factor of 1 to 2, plus a 100% solatium. You also get 12% a year on the market value, and a rehabilitation package if your family is displaced.

The Act replaced the Land Acquisition Act, 1894 and came into force on 1 January 2014.

Key facts

When the 2013 Act applies

The Act applies when the central or a state government acquires land for its own use, for public sector undertakings or for a public purpose. Section 2(1) lists those purposes: defence and national security, infrastructure, industrial corridors, agro-processing, housing for notified income groups, planned development and housing for the poor or displaced.

It also applies when the government acquires land for a private company or a public-private partnership (PPP) project for a public purpose. In those cases, prior consent of at least 80% (private companies) or 70% (PPP projects) of the affected families is required.

Some central laws run their own acquisition process. The Fourth Schedule lists 13, including the National Highways Act, 1956, the Railways Act, 1989 and the Electricity Act, 2003. The RFCTLARR (Removal of Difficulties) Order, 2015, in force from 1 September 2015, applies the 2013 Act’s compensation and rehabilitation rules to acquisitions under those laws too. Several states have also amended the Act for their own projects, so check your state’s version.

Social impact assessment and consent

Before acquiring land, the government must consult the panchayat or municipality and carry out a Social Impact Assessment (SIA) study under Section 4. The SIA notification is published in the local language and uploaded on the government’s website. The study must be finished within six months of starting.

Consent from affected families, where required, is collected alongside the SIA.

Two limits protect farmland. Irrigated multi-cropped land can be acquired only as a demonstrable last resort, within limits the state notifies, and an equal area of wasteland must be developed for farming or its value deposited with the government (Section 10). Linear projects such as railways and highways are exempt from these limits. When urgency powers under Section 40 are used, the government may skip the SIA.

How compensation is calculated

The Collector works out compensation in five steps.

1. Fix the market value on the date of the preliminary notification under Section 11. It is the highest of the stamp-duty value, the average sale price of similar land nearby, or the consented amount.
2. For the average sale price, take registered sale deeds from the three years before the acquisition year and use the half with the highest prices. Past acquisition payouts in the district are excluded.
3. Multiply the market value by the factor in the First Schedule: 1 in urban areas, and 1 to 2 in rural areas as your state notifies.
4. Add the value of buildings, trees, crops and other assets on the land (Sections 27 to 29), plus damage from severance, forced shifting or lost earnings (Section 28).
5. Add a solatium equal to 100% of that total, then add 12% a year on the market value for the period from the SIA notification to the award or possession.

A worked example: rural land with a market value of ₹20 lakh, in an area where the state has notified a factor of 2, and 18 months between the SIA notification and the award.

If your state has notified a lower factor for your area, the figures change. The circle rate often sits below what land actually sells for; our guide to circle rate vs market rate explains why that gap matters here.

Rehabilitation and resettlement

The Second Schedule gives every affected family, landowners and families whose livelihood depends on the land alike, these minimum entitlements on top of land compensation:

Scheduled Caste and Scheduled Tribe families displaced from Scheduled Areas get an additional ₹50,000. In irrigation projects, land-for-land allotment is offered where possible. Stamp duty and registration fees on land or houses allotted under the package are paid by the body acquiring the land.

A different model is land pooling, where you surrender land and get a developed plot back instead of cash. Our explainer on land pooling compares the two.

Objecting and seeking a higher award

For disputed awards, a lawyer who handles land acquisition references is worth consulting.

Tax on compensation

Section 96 of the 2013 Act says no income tax or stamp duty is levied on an award or agreement under the Act, except purchases under Section 46. CBDT Circular 36/2016 (25 October 2016) confirmed this for the Income-tax Act, 1961.

For tax year 2026-27 onwards, the Finance Act, 2026 added entry 38C to Schedule III of the Income-tax Act, 2025. It exempts income from an award or agreement for compulsory acquisition of land under the 2013 Act for individuals and HUFs, again except Section 46 cases. Compensation received in FY 2025-26 falls under the 1961 Act, where Section 10(37) separately exempts gains on compulsorily acquired urban agricultural land.

Land sold voluntarily can attract capital gains tax. See capital gains on property for how that is worked out.

Frequently asked questions

What is solatium in land acquisition?

Solatium is an extra payment for the forced nature of the acquisition. Under Section 30 of the 2013 Act it equals 100% of the compensation amount and is paid on top of it.

Is land acquisition compensation taxable?

Awards and agreements under the 2013 Act are exempt under Section 96, except Section 46 purchases. From tax year 2026-27, Schedule III of the Income-tax Act, 2025 also exempts them for individuals and HUFs.

What is the multiplier factor for rural land?

Between 1 and 2, depending on the land’s distance from an urban area. Each state notifies its own factors, so the figure differs by state and location.

Can the government take land without consent?

For its own projects and public sector undertakings, yes, after the SIA and the notification process. For private companies it needs consent of at least 80% of affected families, and 70% for PPP projects.

How long does the Collector have to make the award?

Twelve months from the declaration under Section 19. The government can extend this, but the extension must be recorded in writing and published on its website.

Where do I challenge a low award?

Apply to the Collector under Section 64 for a reference to the Land Acquisition, Rehabilitation and Resettlement Authority. You can appeal the Authority’s award to the High Court within 60 days.

Sources

• Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 — India Code (checked 16 Sep 2026)
• Compilation of RFCTLARR Act, 2013 with Schedules — Tamil Nadu Revenue and Disaster Management Department (checked 16 Sep 2026)
• Acts, Rules and Policies, including RFCTLARR (Removal of Difficulties) Order, 2015 — Department of Land Resources (checked 16 Sep 2026)
• Finance Act, 2026 — Gazette of India (checked 16 Sep 2026)
• Tax treatment on compulsory acquisition of land — Income Tax Department (checked 16 Sep 2026)