Compensation for motor accident claims raises the question of TDS liability, prompting the Supreme Court to seek the Union’s input on the matter.
the Supreme Court called for the views of the Union and the Income Tax Department regarding the Tax Deduction at Source (TDS) on interest accrued above ₹50,000 in motor accident compensation claims. A bench comprising Justices M.M. Sundresh and Aravind Kumar was considering a writ petition that aimed to streamline the disbursement of compensation and expedite proceedings before the Motor Accident Claim Tribunal (MACT).
Amicus curiae N. Vijayaraghavan informed the Court about the Bombay High Court’s ruling in Rupesh Rashmikant Shah v. UOI, which stated that interest awarded on motor accident claims, from the date of the Claim Petition to the award or appeal date, is not taxable as it does not qualify as income. He noted that, to his knowledge, the Union or Income Tax Department had not contested this decision.
The Court requested a response from the Union regarding this matter. Previously, on November 16, 2021, the Supreme Court acknowledged the inconsistency in TDS rates applied to motor accident claims, which range from 10% to 20% depending on whether claimants possess a PAN card. The Court suggested that Legal Services Authorities or mediation groups should assist claimants in obtaining PAN cards to prevent a 20% tax deduction for those without one.
In 2022, the Court had also instructed the Centre to investigate unclaimed TDS refunds related to motor accident compensation awards, particularly for claimants who may not fall under the Income Tax assessment bracket.
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