No deduction from Salary for Considering Compensation to the victim

"While ascertaining the income of the deceased, any deductions shown in the salary certificate as deductions towards GPF, life insurance premium, repayment of loans etc, should not be excluded from the income,"

The next of kin of motor accident victims can now expect a much higher compensation from insurers. The Supreme Court has ruled that only the income tax component can be deducted from a victim's salary to arrive at his net income for the purpose of calculating the claim amount.


Till now, the monthly income of the victim was calculated after deducting from the gross salary loan repayment premiums, contribution to provident fund and even life insurance payments. This helped insurance companies greatly reduce the victim's `income' on which the compensation is based.

While delivering a judgment in a compensation dispute, the Supreme Court has put a stop to this practice. "While ascertaining the income of the deceased, any deductions shown in the salary certificate as deductions towards GPF, life insurance premium, repayment of loans etc, should not be excluded from the income," a Bench comprising Justices R V Raveendran and H L Gokhale said.

Applying this principle, the court ordered an increase in the compensation to the widow, three children and parents of a 36-year-old police sub-inspector who was killed in an motor accident in 1990, from Rs 14.6 lakh to Rs 19.7 lakh.

The Motor Accident Claims Tribunal had calculated the income of the sub-inspector as Rs 9,489 after taking into account various deductions from a gross salary of Rs 13,794. Applying the relevant multiplier, the tribunal had awarded a compensation of Rs 14.44 lakh.

When the kin of the police official appealed against the tribunal before the Delhi High Court, it enhanced the compensation by Rs 32,000. However, it reduced the interest payable on the compensation amount to 6% from 9% awarded by the tribunal.

The SC did not interfere with the interest rate awarded by the HC, but by applying the new rule for computation of income of the deceased, increased the compensation amount by more than Rs 5 lakh.