Section 10(10BC) Exemption towards compensation received on account of any disaster

The present article highlights provisions of section 10(10BC) of the Income Tax Act, which provides exemption towards amount received in case of any disaster.

Exemption provisions of section 10(10BC) of Income Tax Act–

Provision of section 10(10BC) exempts any amount received / receivable by an individual or legal heir of the individual on account of any disaster. However, any of the following should have paid such amount-

• The Central Government; or
• The State Government; or
• A local authority.

However, the amount received / receivable by the individual or legal heirs of the individual is not allowed as an exemption under section 10(10BC) to the extent the deduction is allowed under the Income Tax Act on account of any loss / damage caused by the disaster.

Meaning of the term ‘disaster’-

As seen above, the exemption under section 10(10BC) is available against the amount received on account of the disaster. Hence it is vitally important to understand the term ‘disaster’.

An explanation to section 10(10BC) of the Income Tax Act states that ‘disaster’ shall have the same meaning assigned under section 2(d) of the Disaster Management Act, 2005. As per the said section, disaster means as under-

Any disaster on account of any natural or man-made causes. It also includes disaster on account of any accident or negligence. Such a disaster should have resulted in any substantial loss of life or human suffering / damage or destruction of property / damage or degradation of the environment. The magnitude of such a disaster should be beyond the coping capacity of the community of the affected area.

Table – Articles on Section 10 Exemptions