According to Justice Arvind Sangwan of the Punjab and Haryana High Court, if the interest on compensation was paid before June 1, 2015, the day the Income Tax Act was modified, the insurance company would have to refund the amount of tax deducted at source (TDS) to claimants in automobile accident cases.Additionally, it has been ruled that the insurance firm may file a revised income tax return to request a refund from the income tax authorities after paying the TDS.
The aforementioned was decided in a number of petitions submitted by insurance companies, where the legal issue was whether or not judgement debtor-insurance companies could be given instructions to deduct TDS from the amount of interest paid on compensation under the Income Tax Act of 1961 when read with the Motor Vehicles Act of 1988. The Motor Accident Claims Tribunal’s various rulings gave rise to the query.
The insurance company would pay interest upon securing “Form 15-G” of Rule 29-C of the Income Tax Act/Rules in cases where the compensation exceeds Rs. 50,000 and is actually paid after June 1, 2015, as per claimant per financial year, according to the court’s ruling. However, when the claimant has provided a declaration on Form 15-G for each financial year, the insurance company is released from its need to pay TDS.Justice Sangwan has further ruled that the insurance company must submit a “calculation” to the Motor Accident Claims Tribunal (MACT) indicating how much TDS is deducted when depositing interest in excess of Rs. 50,000 per claimant per year.
The insurance company will initially need to apply to the MACT for collecting “declaration “Form 15-G”” from the claimants at the time of making payment with interest, according to the court. This is done in order to be relieved of any duty or obligation to the income tax division. After the necessary document is signed, the MACT will next need to disburse the amount in the claimants’ favour.
Case name: Ravinder Kumar v. New India Assurance
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