State Bravery Awardee: Am I Entitled to Income Tax Exemption?

Ans: Pension received by an individual who has been in the service of the Central Government or State Government and has been awarded "Param Vir Chakra" or "Maha Vir Chakra" or "Vir Chakra" or such other gallantry award as the Central Government, is exempt from tax

Ans: I feel proud to reply this question. As per the information provided by the Honorable Government on the website -https://www.gallantryawards.gov.in.
Post-independence, first three gallantry awards namely Param Vir Chakra, Maha Vir Chakra and Vir Chakra were instituted by the Government of India on 26th January, 1950 which were deemed to have effect from the 15th August, 1947. Thereafter, other three gallantry awards i.e. Ashoka Chakra Class-I, Ashoka Chakra Class-II and Ashoka Chakra Class-III were instituted by the Government of India on 4th January, 1952, which were deemed to have effect from the 15th August, 1947. These awards were renamed as Ashoka Chakra, Kirti Chakra and Shaurya Chakra respectively in January, 1967.

Yes, Recipients of Gallantry Awards are given exemption as under,

Section 10(18) provides exemption in respect of pension received by armed personnel, being a winner of Param Vir Chakra, Maha Vir Chakra, Vir Chakra or any other gallantry award notified by the Government. The exemption has also been extended for the family pension, received by any family member of such armed personnel. Family, for this purpose, shall include his spouse, children (whether dependent or independent), parents, brothers and sisters, who were wholly or mainly dependent on him. Pension received by an individual who has been in the service of the Central Government or State government and has been awarded with "Param Vir Chakra" or "Maha Vir Chakra" or "Vir Chakra" or other notified gallantry award is exempt from tax under Section 10(18)(i).

Ans: No, motor vehicle accident compensation does not attract income tax in India.

Key Points to Understand:
Tax-Free Nature: Compensation received from a motor accident claim is not treated as income. Hence, it is fully exempt from income tax.

Legal Backing: This exemption is supported by various judgments from Indian courts, confirming that compensation for injury, disability, or death is not taxable.

Purpose of Compensation: The amount is given to restore financial loss or cover medical expenses, not as income or profit.

Interest on Compensation:

If the court awards interest on the compensation amount, this interest portion may be taxable as “Income from Other Sources.”
However, some courts have also ruled that interest related to delayed compensation is part of the compensation itself, making it non-taxable. This varies based on case specifics.
Final Insights:
The compensation amount itself is tax-free.
Interest earned on delayed compensation might be taxable in some cases.
For large compensation amounts with interest, consult a Chartered Accountant for accurate tax treatment.
Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment