In case of bodily injury or death caused due to a motor accident, the victim (or his legal heirs) are entitled to compensation under the Motor Vehicles Act, 1988. A claim has to be lodged with the Motor Accidents Claim Tribunal (MACT), which awards compensation to the victim or his family members. Often, interest is also awarded on such compensations, on account of the delays in finalisation of the compensation. Is such claim or interest on such claim taxable?
What is the nature of such a compensation? Basically, the objective of the compensation is to ameliorate the sufferings of motor accident victims. The compensation is awarded to mitigate the impact of the misery on account of the accident, so that the injured or the dependents do not have to face the vagaries of life on account of discontinuance of the income earned by the victim. The compensation is thus meant as a solace to the victim or his family members for the suffering caused due to the motor accident. So far as the recipient of the compensation is concerned, it is in the nature of a receipt meant to relieve a personal loss.
