Land Acquisition Compensation: How It's Calculated in India

Land acquisition compensation in India is worked out by a formula, not a negotiation. Under the 2013 land acquisition law, you get the market value of your land times a rural multiplier of 1 to 2, plus the value of trees and structures, plus a 100% solatium, plus 12% a year on the market value until the award. For national highways, the same compensation rules have applied since 2015. This guide shows the formula, gives you a calculator to check an offer, and explains what an NRI owner must do before the deadlines pass.

How is land acquisition compensation calculated?

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, often called the RFCTLARR or LARR Act, sets the formula. It is built in four layers.

1. Market value (Section 26). The collector takes the highest of:

• The circle rate for the area, the value set for stamp duty on sale deeds.
• The average sale price of similar land in the nearest village or vicinity, worked out from the top half of sale deeds by price over the last three years.
• The price agreed with landowners, where land is taken for a private company or public-private project.

2. Multiplier (First Schedule). For rural land, the market value is multiplied by a factor between 1 and 2, which each state notifies based on distance from towns. Urban land gets a factor of 1.

3. Assets (Section 29). Buildings, trees, wells, tubewells and standing crops are valued separately and added.

4. Solatium and additional amount (Section 30). A solatium of 100% of the compensation is added, for the fact that the sale is compulsory. On top of that comes an additional 12% a year on the market value, from the date of the notification to the date of the award or of taking possession, whichever is earlier.

Our guide to circle rates and land value explains how the first input is set.

Does compensation really come to four times the market value?

Only when the rural multiplier is the maximum of 2. Then market value × 2, plus an equal 100% solatium, is four times the market value, before assets and interest.

Many states notify factors below 2 for most villages, so ask for your state's notification and the factor applied to your village. Try your own numbers below.

The estimator uses the same formula as the Act: market value times the multiplier, plus assets, then a 100% solatium on that total, then 12% a year on the market value. Real awards depend on which sale deeds and rates the authority accepts, so use it to sanity-check an award, not to predict one.

How does national highway land acquisition work?

Land for national highways is acquired under the National Highways Act, 1956, not the 2013 Act's procedure. The National Highways Act is listed in the Fourth Schedule of the 2013 Act, Its compensation schedules were extended to highway acquisitions in 2015, first by ordinances from 1 January 2015 and then by a government order from 1 September 2015. In 2019 the Supreme Court also held, in Union of India v. Tarsem Singh, that solatium and interest must be paid on earlier highway acquisitions too. So the procedure is the highway law's, but the money follows the 2013 formula.

1. Section 3A

   The central government publishes its intention to acquire, with survey numbers, in the Official Gazette and in two local newspapers, one in the local language.

2. Within 21 days (3C)

   Anyone interested can file written objections to the use of the land with the competent authority, who hears them and decides.

3. Section 3D

   The government publishes a declaration. The land then vests in the central government, free from all encumbrances.

4. Section 3G

   The competent authority for land acquisition (CALA), usually a deputy collector or SDM, fixes the compensation and invites claims from owners.

5. Section 3H

   The amount is deposited and paid to the owners whose names and shares are proved.

6. Section 3E

   The authority can order owners to hand over possession, usually within 60 days.

7. Section 3G(5)

   If the amount is not acceptable, either side can apply for arbitration by an arbitrator appointed by the central government, often the divisional commissioner. The arbitrator's award can then be challenged in court.

National highway land acquisition compensation is calculated using the same First Schedule: market value, multiplier, assets and 100% solatium. The details of interest for highway cases have been argued in court, so ask a local lawyer how they apply to your award.

Why do NRI owners miss acquisition notices?

Because the notices are made for people who live there. They are published in the Gazette, in local newspapers and on notice boards, and then the clock runs, whether you saw them or not.

The most common NRI problems:

• Missing the objection window. Under the National Highways Act it is 21 days. Under the 2013 Act, objections to a preliminary notification must be filed within 60 days.
• Compensation paid to the person in possession. If the record is out of date, or a relative is farming the land, the money may be claimed by them.
• Old records. If your name was never mutated after a parent's death, you must prove your share before you are paid. Our guide to transferring land after a parent dies explains that step.
• Accepting a low award without knowing the formula. Arbitration and references to court have time limits counted from the award.

How do you file objections and claims from abroad?

Through a local lawyer, quickly. Most of the steps are written, and you rarely need to appear in person.

1. 1

   Get the notification

   Ask for the Gazette notification and the list of survey numbers. Check whether your khasra or survey number is on it, and what area is being taken.
2. 2

   Check your land record

   Make sure your name and share are correct in the record. If not, apply for mutation or correction now, before the award.
3. 3

   File objections in time

   If you object to the acquisition itself, or the area, your lawyer files a written objection within the window: 21 days for highways, 60 days under the 2013 Act.
4. 4

   File your claim with proof

   When the authority invites claims, submit your title papers, the record of rights, ID and bank details, and evidence of trees, wells or structures, with photos.
5. 5

   Collect evidence of value

   Gather recent sale deeds of similar land nearby. Higher comparable sales are the strongest argument for a better award.
6. 6

   Dispute a low award

   Ask for arbitration under the highway law, or a reference to the authority under the 2013 Act, within the time limit.

If you give someone authority to act for you, keep it narrow, limited to this acquisition, with payment only to your own bank account. Read power of attorney risks for NRIs first.

Is land acquisition compensation taxable?

Often not. Section 96 of the 2013 Act exempts compensation from income tax, and the CBDT confirmed in Circular 36 of 2016 that compensation received under an award or agreement under the 2013 Act is not taxable, even without a matching exemption in the Income-tax Act.

Other rules can also help:

• Rural agricultural land is not a capital asset, so there is no capital gains tax on it at all. Check with the agricultural land capital asset checker.
• Urban agricultural land compulsorily acquired is exempt if it was used for farming by you or a parent for two years before the transfer. This was Section 10(37) of the 1961 Act and is now in Schedule III of the Income-tax Act, 2025, which applies from tax year 2026-27.

Whether the Section 96 exemption covers acquisitions under the National Highways Act has been argued before tax tribunals and courts. Ask a CA to look at your award.

What about TDS on compensation for NRIs?

For residents, tax is deducted at 10% on compulsory-acquisition compensation above ₹5 lakh in FY 2026-27, under section 393(1) of the Income-tax Act, 2025 (formerly section 194LA), and not at all on awards exempt under Section 96.

That concessional rule is for residents. For NRIs, the paying authority usually deducts tax under the non-resident rules, which can be much higher. If your compensation is exempt or your gain is small, apply early for a lower TDS certificate, and claim any excess back in your Indian return. Our guide to tax on selling agricultural land covers the wider rules.

How can you stay ahead of an acquisition?

Keep your record clean and your eyes on it. A correct, current land record means the compensation comes to you, not to whoever is on the land.

When land vests in the government, the land record changes too: in many states the owner column or a mutation entry is updated to show the government or the acquiring authority. PlotPehra checks the official land record every week in 19 states and flags changes like a new owner or a new mutation entry, reviewed by a real person and explained by email and WhatsApp. We do not monitor gazettes or newspapers, so keep an eye on local notices too. No power of attorney, ever.

This is general information, not legal or tax advice. Compensation, objection deadlines and tax depend on the law used, your state and your facts, so talk to a local lawyer and a chartered accountant before you accept or dispute an award.