Tds u/s 194a(3)(ix) of it act.
This query is : Resolved
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'.
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 From this date the threshold limit of RS. 50K was withdrawn.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.
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 From this date the threshold limit of RS. 50K was withdrawn.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
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.
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.
02 August 2025
You’ve rightly pointed out a real-world problem many victims of motor accident cases face: **TDS deducted on interest from Motor Accident Compensation**, even though courts have held such interest to be **not taxable** or at least **compensatory in nature**.
Let’s resolve your issue in three parts:
---
## ✅ 1. **Legal Position – Is the Interest Taxable?**
As per **Section 194A(3)(ix)** (post-amendment from 1 June 2015):
> **No TDS shall be deducted** on interest awarded by the **Motor Accident Claims Tribunal (MACT)** **irrespective of amount**, provided the interest is **on compensation**.
### Supporting Case Law:
Several courts and ITATs have ruled that **interest on compensation** under the **Motor Vehicles Act** is:
* **Not taxable**, or
* **Part of compensation**, hence **not "income"** under the Income Tax Act.
Some key cases:
* *Urvi Chirag Sheth vs ITO (ITAT Ahmedabad)* – ITA No. 630/Ahd/2016
* *New India Assurance Co. Ltd. vs Savitri Devi* – Punjab & Haryana HC
* *CIT vs The Oriental Insurance Co. Ltd.* – Allahabad HC
---
## ✅ 2. **TDS Has Already Been Deducted – What Now?**
Even though **TDS should not have been deducted**, you now **have to claim refund** of that TDS **via ITR**.
> 🧾 **Key Point**: There is **no specific “exemption” field** in ITR for MACT interest. You must declare the interest and **claim it as non-taxable** through disclosure.
---
## 🧾 3. **How to Show It in ITR and Claim Refund**
Here’s how to file your ITR (say, ITR-1 or ITR-2) to claim the TDS refund:
---
### 🔹 Step-by-step Guide:
1. **Declare the interest income** under:
* **"Income from Other Sources"**
* Enter full amount of interest (e.g., ₹1,00,000)
2. **Then deduct the same amount** under:
* **"Exempt Income" or "Others – Specify"**
* Mention: “Interest on Motor Accident Compensation – Not Taxable”
3. Go to **Schedule TDS**:
* Enter **TDS deducted** (as per Form 26AS or TDS certificate)
* Mention the correct TAN of the deductor (usually insurance company)
4. The ITR utility will calculate the **refund automatically** based on TDS shown and taxable income (which will be NIL for this interest).
---
## 🔄 Example:
| Particular | Amount |
| ------------------------------------ | --------- |
| Interest received | ₹1,00,000 |
| TDS deducted | ₹10,000 |
| Income offered under “Other Sources” | ₹1,00,000 |
| Less: Claimed as Exempt | ₹1,00,000 |
| Taxable Income from this head | ₹0 |
| Refund claimed | ₹10,000 |
---
## 🛑 Important Notes:
* **Keep documentary proof**:
* TDS certificate (Form 16A)
* MACT award copy
* Bank credit statement
* In case of **scrutiny**, be ready to submit these
---
## ✅ Summary:
| Issue | Resolution |
| -------------------------- | --------------------------------------------------------------- |
| Interest from MACT | **Not taxable** if compensatory |
| TDS deducted wrongly | Can claim **refund via ITR** |
| No specific exemption code | Show in “Other Sources” & deduct under “Exempt income – Others” |
| Proof required? | Yes – award letter, TDS certificate, court orders if needed |
---
Let me know if you'd like a **draft of how to write this in the ITR notes** section or help with filling ITR step-by-step.
Let’s resolve your issue in three parts:
---
## ✅ 1. **Legal Position – Is the Interest Taxable?**
As per **Section 194A(3)(ix)** (post-amendment from 1 June 2015):
> **No TDS shall be deducted** on interest awarded by the **Motor Accident Claims Tribunal (MACT)** **irrespective of amount**, provided the interest is **on compensation**.
### Supporting Case Law:
Several courts and ITATs have ruled that **interest on compensation** under the **Motor Vehicles Act** is:
* **Not taxable**, or
* **Part of compensation**, hence **not "income"** under the Income Tax Act.
Some key cases:
* *Urvi Chirag Sheth vs ITO (ITAT Ahmedabad)* – ITA No. 630/Ahd/2016
* *New India Assurance Co. Ltd. vs Savitri Devi* – Punjab & Haryana HC
* *CIT vs The Oriental Insurance Co. Ltd.* – Allahabad HC
---
## ✅ 2. **TDS Has Already Been Deducted – What Now?**
Even though **TDS should not have been deducted**, you now **have to claim refund** of that TDS **via ITR**.
> 🧾 **Key Point**: There is **no specific “exemption” field** in ITR for MACT interest. You must declare the interest and **claim it as non-taxable** through disclosure.
---
## 🧾 3. **How to Show It in ITR and Claim Refund**
Here’s how to file your ITR (say, ITR-1 or ITR-2) to claim the TDS refund:
---
### 🔹 Step-by-step Guide:
1. **Declare the interest income** under:
* **"Income from Other Sources"**
* Enter full amount of interest (e.g., ₹1,00,000)
2. **Then deduct the same amount** under:
* **"Exempt Income" or "Others – Specify"**
* Mention: “Interest on Motor Accident Compensation – Not Taxable”
3. Go to **Schedule TDS**:
* Enter **TDS deducted** (as per Form 26AS or TDS certificate)
* Mention the correct TAN of the deductor (usually insurance company)
4. The ITR utility will calculate the **refund automatically** based on TDS shown and taxable income (which will be NIL for this interest).
---
## 🔄 Example:
| Particular | Amount |
| ------------------------------------ | --------- |
| Interest received | ₹1,00,000 |
| TDS deducted | ₹10,000 |
| Income offered under “Other Sources” | ₹1,00,000 |
| Less: Claimed as Exempt | ₹1,00,000 |
| Taxable Income from this head | ₹0 |
| Refund claimed | ₹10,000 |
---
## 🛑 Important Notes:
* **Keep documentary proof**:
* TDS certificate (Form 16A)
* MACT award copy
* Bank credit statement
* In case of **scrutiny**, be ready to submit these
---
## ✅ Summary:
| Issue | Resolution |
| -------------------------- | --------------------------------------------------------------- |
| Interest from MACT | **Not taxable** if compensatory |
| TDS deducted wrongly | Can claim **refund via ITR** |
| No specific exemption code | Show in “Other Sources” & deduct under “Exempt income – Others” |
| Proof required? | Yes – award letter, TDS certificate, court orders if needed |
---
Let me know if you'd like a **draft of how to write this in the ITR notes** section or help with filling ITR step-by-step.
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