Overview
- Finance Minister Nirmala Sitharaman announced that interest awarded by Motor Accident Claims Tribunals to a natural person will not be taxed and will face no TDS.
- The change takes effect on April 1, 2026 and applies for tax year 2026–27 and thereafter, according to the Budget documents.
- The exemption and TDS removal cover interest on compensation awarded under the Motor Vehicles Act to individuals and their legal heirs for death, permanent disability or bodily injury.
- Media accounts note that insurers had been deducting TDS—often reported at 10% on interest above ₹50,000—leading to delayed or unclaimed refunds for many victims.
- The move follows judicial scrutiny, with the Supreme Court seeking the Centre’s view in 2024 on TDS applicability and the Bombay High Court holding such interest forms part of compensation and is not income.