Taxability of Compensation Received in the Delhi Bomb Blast Case

The Incident – Delhi Red Fort Car Blast

The recent Delhi bomb blast near Red Fort shocked the entire nation. The explosion, caused by an explosive-laden vehicle near Red Fort Metro Station, resulted in multiple casualties and serious injuries. Investigations have been taken over by the NIA, and the incident is being treated as a major terror attack.

Government Compensation Announced

To support the affected families, the Delhi Government announced ex-gratia relief, as follows:

• ₹10 lakh for the families of the deceased
• ₹5 lakh for victims who suffered permanent disability
• ₹2 lakh for those with serious injuries

These payments are meant to provide immediate financial relief during a time of distress.

A common question many families are asking is:
“Is this compensation taxable under Indian Income Tax laws?”

Taxability of the Compensation

A common question among victims’ families is whether these amounts are taxable.
The answer is NO — the compensation is completely tax-exempt.

How ?

Section 10(10BC) of Income Tax Act :

“In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included:

any amount received or receivable from the Central Government or a State Government or a local authority by an individual or his legal heir by way of compensation on account of any disaster, except the amount received or receivable to the extent such individual or his legal heir has been allowed a deduction under this Act on account of any loss or damage caused by such disaster.

 Explanation.—For the purposes of this clause, the expression “disaster” shall have the meaning assigned to it under clause (d) of section 2 of the Disaster Management Act, 2005 (53 of 2005)”

Means: Compensation amounts received from the Central/State Government or local authority on account of disasters are exempt except to the extent the individual/legal heir already claimed a deduction under the Act for loss/damage caused by the disaster. This is similar in principle—amounts compensating for the loss which was already deducted cannot be exempt again.

How to Report Ex-Gratia Compensation in ITR

Option 1: No Reporting Required (Most Common Practice)

For most taxpayers receiving ex-gratia compensation under Section 10(10BC), no disclosure is required in the ITR. Since this is:

• A capital receipt (not income)
• Explicitly exempt under Section 10(10BC)
• Not part of total income computation

You can simply omit it entirely from your ITR filing.

Option 2: Voluntary Disclosure in Schedule EI (Optional)

If you want to maintain complete transparency or if the amount is substantial and you want to proactively document it, you may optionally disclose it in:

Schedule EI (Exempt Income) under the relevant ITR form:

• ITR-1 (Sahaj): Schedule EI – “Any other exempt income”
• ITR-2: Schedule EI – “Any other exempt income”

In Schedule EI, you would report it as:

• Description: “Ex-gratia compensation received from Delhi Government on account of disaster u/s 10(10BC)”
• Amount: ₹10,00,000 (or applicable amount)

Why Schedule EI Reporting is Optional (Not Mandatory)

According to Income Tax guidance:​

• Schedule EI is meant for certain types of exempt income like agricultural income, dividends, interest from specified investments
• Disaster compensation under 10(10BC) is not specifically mandated to be disclosed
• The department’s position is that truly capital receipts (like disaster relief) need not be reported

What in case you had not reported in ITR but tax notice comes due to Bank Reporting:

When this amount is credited to your bank account:

• No issue with Income Tax Department – Banks report high-value transactions, but this is documented as government compensation
• Keep supporting documents: Government notification, payment receipt, identity proof
• If questioned by bank or tax officer, provide proof of exemption under Section 10(10BC)

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