The tax holiday period on business income earned by a unit in International Financial Services Centre has been increased from 10 to 20 years (out of a block of 25 years.
The FM also proposed to set up five hubs for medical tourism and a Rs 10,000-crore outlay for Biopharma Shakti programme over the next five years.
New Delhi:Union Finance Minister Nirmala Sitharaman, presenting the Union Budget 2026–27 in Parliament, announced that any interest awarded by the Motor Accident Claims Tribunal (MACT) to a natural person will be exempt from income tax.
Sitharaman further stated that any tax deducted at source (TDS) on such interest will be done away with, ensuring that beneficiaries receive the full amount without deductions.
Under current provisions, interest components awarded by Motor Accident Claims Tribunals (MACT) — often substantial due to delays in claim settlements — are treated as taxable income under the Income Tax Act. This has resulted in victims or their dependents losing a portion of the compensation to tax liabilities, sometimes forcing them to navigate complex refund processes or face reduced financial support for medical care, rehabilitation, and livelihood restoration.
The Finance Minister emphasised that the exemption applies specifically to interest awarded to a “natural person” (individual claimants), recognising the compensatory and humanitarian nature of these awards.
“Any interest awarded by the Motor Accident Claims Tribunal to a natural person will be exempt from income tax, and any TDS on this account will be done away with,” FM Sitharaman said in her budget speech.
According to the Budget document, the provisions of the Motor Vehicles Act, 1988, inter alia, provide for compensation and an interest on the compensation to be awarded by the tribunal to an individual or his/her legal heir, on account of death or permanent disability or any bodily injury under the said Act.
“In order to alleviate sufferings of victims of such accident and their family, which may cause extreme hardship to the aggrieved person and family, it is proposed to amend the said Schedule to provide exemption to an individual or his legal heir, on any income in the nature of interest under the Motor Vehicles Act, 1988,” it said.
The document said these amendments will take effect from April 1, 2026, and shall accordingly apply in relation to the tax year 2026-27 and subsequent tax years.
Road accidents remain a major public health and economic challenge in India, with thousands of fatalities and injuries annually leading to prolonged legal battles for compensation.
The delays in tribunal awards often inflate the interest component, intended to compensate for the time value of money and suffering endured. By removing the tax burden, the government aims to make the compensation more meaningful and victim-centric, aligning with efforts to improve ease of living and support vulnerable sections.
This move has been welcomed by legal experts, victim rights groups, and insurance stakeholders, who argue it addresses a long-standing inequity.
It prevents erosion of awards meant for rehabilitation and could encourage faster claim resolutions.