Compensation from non employer

Section 10 (10BC ) of the IT Act 1962 which provides that any compensation received or receivable from the Central Government or a State Government or a local authority by an individual or his legal heir by way of compensation on account of any disaster, except the amount received or receivable to the extent such individual or his legal heir has been allowed a deduction under this Act on account of any loss or damage caused by such disaster.

Explanation.--For the purposes of this clause, the expression "disaster" shall have the meaning assigned to it under clause (d) of section 2 of the Disaster Management Act, 2005(53 of 2005);] 

The disaster management Act defines a disaster as– “catastrophe, mishap, calamity or grave occurrence in any area, arising from natural or man made causes or by accident or negligence which results in substantial loss of life of human sufferings or damage to , and destruction of property, or degradation of, environment and is of such nature or magnitude as to beyond the coping capacity of the community of the affected area”. 

Many High Courts have held that the compensation awarded by the Motor Accident Claims Tribunal (MACT) to accident victims cannot be subjected Income Tax since the compensation and the interest awarded therein does not fall under the term ‘income’...

Even though section 10 (10BC) not applicable in this particular case, but the explaination to it and the cases related to compensations awarded to MACT accidents imply that the loss to such victim is not taxable , as the receipt is of capital nature and not income.