The Supreme Court established that the average income from the last three Income Tax Returns (ITRs) of self-employed individuals should be considered in compensation assessments, particularly in motor accident cases.
Three-Year ITR Average for Self-Employed Income Assessment
In a significant ruling, the Supreme Court of India has affirmed that when assessing the income of self-employed individuals for the purpose of compensation, the average income derived from the last three years of Income Tax Returns (ITRs) should be utilized. This approach aims to enhance the compensation awarded in motor accident cases.
The Court underscored the importance of accurately reflecting an individual’s financial standing over a sustained period rather than relying on an isolated financial year. This decision is intended to account for the variable nature of self-employed income.
Legal practitioners should note this ruling as a critical precedent for motor accident compensation claims and consider the implications of longitudinal income assessments in their case strategies.
Citations
- Supreme Court of India (2026) 1 S.C.R. 105
