BUDGET
No income tax, TDS on interest on claims by motor accident tribunal
This story was originally published at 14:56 IST on 1 February 2026
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NEW DELHI – There will be no income tax and tax deducted at source on the interest awarded by the Motor Accident Claims Tribunal for the claims of a natural person, Finance Minister Nirmala Sitharaman announced in the Budget for 2026-27 (Apr-Mar). This step is taken to alleviate the suffering of victims of motor vehicle accidents and their families, Sitharaman said.
Under the Motor Vehicles Act, 1988, the insurer is liable to pay compensation in the event of death or permanent disablement of a motor vehicle. The Motor Accident Claims Tribunal is established to adjudicate claims for compensation arising from motor accidents.
In certain cases, the claims given by the tribunal may involve delay due to the filing of a compensation claim, investigation, adjudication of the claim and various other factors. For this, a provision exists in the 1988 Act to compensate the injured or their legal heirs for the delay in payment of compensation. This provision states that a simple interest shall also be paid on the claims given to the person.
The courts in India have taken different interpretations on whether these interests should be taxable. The Allahabad High Court, the Himachal Pradesh High Court, and the Punjab and Haryana High Court have held that these payments are not income and that no tax is deductible at source. However, the Patna High Court and the Madras High Court have held that such payments are deductible at source. The announcement made in the Budget has brought clarity to the law and relief to accident victims. End
Reported by Surya Tripathi
Edited by Saji George Titus
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