Finance Minister Nirmala Sitahraman on Sunday (February 1, 2026) proposed tax exemption on compensation awarded by the Motor Accident Compensation Tribunal within the Union Funds for 2026-2027.
In accordance with the price range doc, the provisions of the Motor Automobiles Act, 1988 present for, inter alia, compensation and curiosity on compensation awarded by the court docket to an individual or his authorized heirs on account of loss of life, everlasting incapacity or private harm underneath the Act.
“In an effort to alleviate the struggling of the victims of such accidents and their households, which can trigger excessive hardship to the victims and their households, it’s proposed to amend the above schedule to supply exemption to people or their authorized heirs for earnings within the nature of curiosity underneath the Motor Automobiles Act, 1988,” it mentioned.
In accordance with the doc, these amendments will come into impact from April 1, 2026 and can apply accordingly for the 2026-27 tax yr and subsequent tax years.
It additionally said that curiosity on compensation awarded to people by the Motor Car Accident Compensation Courtroom is not going to be deducted at supply.
“In an effort to present reduction to people and alleviate the hardship attributable to the accident, it’s proposed that curiosity on compensation awarded to people by the Motor Car Accident Claims Tribunal not be topic to withholding tax,” the doc states.
This modification will come into impact from April 1, 2026.
