Union Budget 2026-27 - Finance Bill, 2026

Exiting section 11 of the Income-tax Act, 2025 inter alia provides for the exemption of income of persons included in Schedule III subject to the fulfilment of conditions specified therein.

2. The provisions of Motor Vehicles Act, 1988 inter alia provides for compensation and interest on such compensation to be awarded by the tribunal under said Act, to an individual or his legal heir, on account of death or on account of permanent disability or any bodily injury under the said Act.

3. 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.

4. These amendments will take effect from the 1st day of April, 2026 and shall accordingly, apply in relation to the tax year 2026-27 and subsequent tax years.

[Clause 108]

 

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Full Text:

Union Budget 2026-27 - Finance Bill, 2026

Interest income under Motor Vehicles Act now exempt for individuals and legal heirs from FY 2026-27 onward. Interest payable as part of compensation under the Motor Vehicles Act, 1988 to an individual or the legal heir for death, permanent disability, or bodily injury is proposed to be exempt by addition to the Income-tax Act Schedule; the amendment is effective from 1 April 2026 and applies to the tax year commencing then and subsequent years.