01 May 2018
I have been awarded Motor Vehicle Accident compensation and I am entitled for interest on amounting to Rs.1,00,000/- per year on the compensation amount. Under Sec.194A94A(3)(ix) of IT Act, I am entitled for exemption upto Rs.50,000/-. There is no provision in the ITR Form to claim this exemption. How to claim this exemption?
01 May 2018
It is not an 'exemption' but an 'deduction' as per section 57(iv) and ,therefore, to be deducted from interest to be shown under the head 'income from other sources'.
01 May 2018
Sub section 3 of section 194A provides where the interest shall not be liable for TDS deduction under this section. Clause (ix) of subsection 3 was amended w.e.f. 1 June 2015. From this date the threshold limit of RS. 50K was withdrawn. Which means that after 1 June 2015, no tds shall be deducted on interest paid interest on compensation awarded by Motor Accidents claims Tribunal. It does not specify that the interest shall be exempt to any extent in the hands of receiver. In my opinion, the interest part shall be taxable under income from other sources. Views of others members are invited for further clarification.
03 May 2018
The courts have decided that even interest on compensation is also not taxable in such cases where payment of compensation amount is not made to the claimant due to the pendency of legal procedures. The New India Assurance Co. Ltd. Vs Savitri Devi (Punjab and Haryana High Court) case may be read for further clarification- https://taxguru.in/income-tax/no-tds-on-interest-on-compensation-under-motor-vehicles-act-1988.html
05 May 2018
Sir, The following judgements also have held that interest is also part of the compensation and hence not taxable. 1.IT Appellate tribunal, Ahmedabad, I.T.A. No.: 630/Ahd/16 Urvi Chirag Sheth Vs. Income Tax Officer order dated May 31st, 2016 2.Income Tax Appellate Tribunal- Delhi, dated27th September, 2004 - Oriental Insurance Company Ltd. –Vs- Income Tax Officer (2005)96TTJ Delhi 589 3. Judgement of Allahabad High Court dated 13th September,2012, -Income Tax Appeal No. 441 of 2006 Commissioner of Income Tax –V-s The Oriental Insurance Co.Ltd. 4. Madras High Court dated 2nd June,2016, - Managing Director, TamilNadu State Transport Corporation (Salem) Ltd., -Vs-Chinnadurai. But the issue is that the amount has been paid to me after TDS. My understanding is that there is no provision in the ITR Form to claim refund. In this context, the issue is how to claim the TDS refund. I seek your expert Opinion. Thanks.
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