TDS deducted on Interest on Accidental Claim

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When a nominee receives an accidental death claim with interest, the insurance company may deduct TDS under Section 194A. However, various High Court judgments, such as CIT v. Chiranji Lal Multani Mal Rai Bahadur (P) Ltd., establish that this interest is part of compensation and considered a capital receipt, thus exempt from TDS. You can claim this exemption when filing your Income Tax Return (ITR) by showing the interest income under the exempt income schedule, citing the relevant case law for justification.

Sandeep K

Sandeep K (Querist)
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02 March 2021 Accidental death claim amount received by Nominee with Interest but the insurance company deducted TDS on Interest received u/s 194A, Under which section we can claim the exemption of the Interest amount ?, As per various High court judgments the interest amount is part of compensation and it should be capital receipt so should not be liable to deduct TDS.

Thanks in advance...

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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03 March 2021 File ITR and show interest income under exempt income schedule giving details as interst on accident compensation.

Sandeep K

Sandeep K (Querist)
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03 March 2021 Is there any mandatory requirement to show section while taking exemption ? if yes, then which section we will be applicable in this case ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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03 March 2021 Not mandatory. Quote the case.
Interest awarded as compensation is not a revenue receipt. In CIT v. Chiranji Lal Multani Mal Rai Bahadur (P) Ltd., Punjab and Haryana High Court.

Sandeep K

Sandeep K (Querist)
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03 March 2021 Thank you very much sir

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