Landowners in Bengaluru are facing potential tax burden on compensation received

In a possible setback for landowners around Bengaluru, hundreds of farmers whose land is acquired for the city’s Peripheral Ring Road (PRR) project, also known as Business Corridor Project, could face tax liabilities on the compensation received.

Designed to encompass the periphery of the city, the project aims to reduce traffic congestion and improve connectivity in the region. It will cross 10 major intersections and over 100 minor intersections, strategically placing 16 flyovers at key locations such as Hesarghatta Road, Old Madras Road, Whitefield Road, Channasandra Road and Hosur Road, among others.

According to one report Through Deccan HeraldBangalore Development Authority (BDA) acquired approximately 2,560 acres of land under the Land Acquisition Act, 1894. This older legislation lacks the tax exemptions provided under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (RFCTLARR) Act, 2013.

A state order issued on September 21 confirmed that the BDA would calculate compensation for these lands based on the guideline value and provisions of the 1894 Act.

Although the RFCTLARR Act provides tax relief for acquired lands, these benefits do not extend to acquisitions under the 1894 Act, which the BDA currently uses.

The issue was further complicated by a ruling by the Karnataka High Court on October 29. The court clarified that tax exemptions on land acquisition apply only to cases dealt with under the 2013 law, and will affect not only PRR farmers but also potentially those involved in projects in Karnataka’s industrial areas. Development Board (KIADB) and the Karnataka Road Development Corporation. Both agencies also use laws other than the RFCTLARR law for land acquisition.

This ruling has raised concerns among affected farmers, who claim that the use of the 1894 Act denies them fair compensation and subjects them to potential tax liabilities, including a 12.5 percent reduction due to tax deduction at source (TDS ).

In addition, the fiscal implications of a recent government move to reduce the guideline value of PRR properties are increasing concerns about the adequacy of compensation.

Business Corridor project

This ambitious project will include 16 flyovers, 10 flyovers and 12 underpasses, improving the city’s transportation network. Moreover, the plan includes bridges across seven water bodies, including prominent water bodies such as Chikkatogur Lake, Gunjur Lake and Jarakabande Lake, further facilitating seamless connectivity.

To address traffic concerns, the project includes six cloverleaf bridges, providing a solution for efficient criss-crossing without congestion.

Designs made public by the BDA show a 100 meter wide greenfield highway, with green spaces, utilities, underground cables, footpaths, cycle paths and drains.

The main carriageway, with eight lanes, is flanked on both sides by service roads, with a wide central reservation reserved for possible future integration with the metro project.

The project covers 65.95 km between Hosur Road and Tumakuru Road, with another 3.4 km near Madanayakanahalli and 4.08 km near Hebbagodi to seamlessly connect existing roads to the PRR network.