Most Important Amendment In Income Tax In 2026

Last Updated: April 19, 2026

Table of Contents

Most Important Amendment in Income Tax in 2026: Exemption on Interest on MACT Claim:

What is MACT ?

MACT or Motor Accidents Claims Tribunal is a special court in which the cases related to claims for compensation from road accidents by motor vehicles.

What is a MACT Claim?

MACT claim can be filed in the tribunal for getting compensation for a loss that may be occurred to someone due to road accident. The accident may result in injury or death for which the claim can be filed. It can be filed by the victim himself or their family members (in case of death) against the person who did the accident or against the insurance company for insurance claim.

What compensation can be claimed?

The compensation may be for the medical treatment costs, loss of earnings, financial support to family and other legible expenses.

Why Interest is required to be paid on claim ?

Sometimes such claims in India may take 2-5 years or even more for decision of court. So interest from the period of lodging claim and upto the date of actual payment is required to be paid by the other party or the insurance company.

Exemption on Interest on MACT Claim

Position upto 31.03.2026

Upto 31.03.2026, any interest payable on compensation awarded by Motor Accidents Claims Tribunal is taxable in the hands of the recipient. Compensation amount was already tax free being capital receipt. But interest amount was taxable and it sometimes used become a huge amount taxable in higher slabs. So, an amendment in taxability of interest on MACT claim was awaited since long.

Amendment by Finance Bill 2026

Finance Bill 2026 has proposed amendment in Schedule III of the Income Tax Act, 2025 whereby interest on compensation awarded by a Motor Accidents Claims Tribunal to an individual or his legal heir will be fully exempt from income tax. This will be applicable from 01.04.2026 which means that interest on claims awarded on or after 01.04.2026 will be totally tax free. This is the most awaited amendment in Income Tax in 2026.

But one thing is to be kept in mind that this exemption is available only to individual (or his legal heir). Other entities like companies, partnership firms, etc. will not get this exemption.

The most important benefit of Exemption

Since the interest on MACT claim was taxable, it was subjected to TDS also. Some of the illiterate persons even didn’t had PAN numbers and in such case TDS was deducted at 20% rate. For claiming such TDS firstly they had to apply for PAN and request the insurance company to file revised TDS return and updating their PAN therein. Till they come to know that such TDS could be refunded back by filing ITR and the above process of PAN updation, the date of filing ITR could get lapsed. Due to this, such TDS could not be claimed and this was a huge loss to victim or their legal heir.

But now after amendment, since the interest is tax free and tds is also not required to be deducted thereon, the victims or their legal heri are free from such burden of filing ITR and claiming refund or loss of TDS if ITR couldn’t be filed within due date.

Conclusion

Thus, Exemption on Interest on MACT Claim is a landmark amendment proposed in Finance Bill 2026 applicable from 01.4.2026. It guarantees that when relief finally comes, it comes in full .The interest on claim was actually not income, it was a type of compensation delay in granting compensation. Therefore, now it will be correctly treated being similar to compensation, ie, tax free.

Income Tax India 2026 : A Complete Guide

Author

CA Ajay Khandelwal is a Chartered Accountant and financial expert with over 21 years of experience in taxation, compliance, and business advisory. As a key expert at AspirixWriters, he provides practical insights on income tax, financial planning, and regulatory matters, helping readers make informed financial decisions.

Author profile CA. Ajay Khandelwal

Disclaimer

This article is for educational and informational purposes only and based on understanding of the author on the subject matter. It is not personal tax advice. Mutual Funds India Complete Beginner’s Guide 2026Income Tax India 2026 Complete Guide

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