Taxability of punitive damages

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Vaishali Gupta (Querist)

23 August 2015 Dear Sir/Mam,

I have a client who got damages of Rs. 1,15,0000 by a person who is responsible for his(client) accident as per court decision. Now according to me it will not considered as compensation rather considered as punitive damages received. Am I Right? and If I am right then under which head this income should be taxable?

Amol S Joglekar

Amol S Joglekar (Expert)

23 August 2015 is it one lakh fifteen thousand or eleven lakh fifty thousand?

Anyway, why are you trying to distinguish between compensation and punitive damages?

In the hands of your CLIENT, it is compensation. Same should be CAPITAL receipt. By any stretch of imagination, it can not be considered to be INCOME. (Amount is immaterial)

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Vaishali Gupta

Vaishali Gupta (Querist)

23 August 2015 Thank you sir for your advice. I have just one question that if in any manner it is considered as compensation then when punitive damages received will be considered as income?

Amol S Joglekar

Amol S Joglekar (Expert)

24 August 2015 I don't think the change in nomenclature would change the taxability of the same. Let the wording be punitive damages and still it is NOT taxable as income in the hands of receipient.
Your views please

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