Overview
- The Supreme Court, which ruled on Wednesday, July 1, 2026, issued binding guidance on using Income Tax Returns (ITRs) to compute annual income for motor-accident compensation claims.
- For salaried claimants the court said the immediately preceding year’s ITR will ordinarily be the primary benchmark for annual income.
- For self-employed claimants the court directed tribunals to ordinarily use an average of up to the three prior years’ ITRs while taking the business’s nature, growth and filing dates into account.
- Judges were told to consider corroborative records such as promotion letters and financial statements and to be wary of ITRs filed after a death or injury that may show inflated income.
- The court applied the new framework in July 1 decisions that raised at least one family award to about Rs 1.97 crore and signalled that lower courts and insurers must now follow these rules when setting future compensation.