IndiaWhat is the structured formula for motor accident compensation?
Motor accident compensation in India follows a structured formula under the Motor Vehicles Act, 1988 — primarily using the 'multiplier method' based on age, income, and dependency to calculate lump-sum compensation.
What the Law Says
The Motor Vehicles Act, 1988 provides the statutory framework for calculating motor accident compensation in India. The Supreme Court has standardised the 'multiplier method' to ensure fair, consistent, and non-arbitrary awards.
Compensation is calculated using the 'multiplier method', where the annual loss of dependency (ALD) is multiplied by a factor (multiplier) based on the deceased’s or injured person’s age. The ALD is derived from the victim’s net annual income after deducting personal living expenses (typically 30%).
Section 163A of the Motor Vehicles Act, 1988 allows for 'no-fault liability' — meaning compensation is payable even without proof of driver negligence, up to ₹50,000 for death and ₹25,000 for grievous hurt. Section 166 enables claims before the Motor Accidents Claims Tribunal (MACT) for fault-based compensation.
The multiplier ranges from 1 (for victims aged 80+) to 18 (for victims aged up to 25), decreasing by one for every 5-year age bracket. Courts also award 7% interest on awarded compensation from the date of application until payment.
Statutory TextWhere the death or permanent disablement has resulted from an accident arising out of the use of a motor vehicle, the owner shall be liable to pay compensation… as may be determined by the Tribunal.
— Motor Vehicles Act, 1988, s. 140 — Liability in certain cases
Statutory TextThe claimant may make an application to the Tribunal for compensation… in respect of any accident involving the death of, or bodily injury to, any person.
— Motor Vehicles Act, 1988, s. 166 — Application for compensation
Statutory TextThe amount of compensation payable… shall be such as may be determined by the Tribunal having regard to the nature of the injury and the extent of loss suffered.
— Motor Vehicles Act, 1988, s. 163A — Compensation in hit-and-run cases
What Courts Have Said
Indian courts have repeatedly refined and clarified the compensation formula to ensure fairness, consistency, and adequacy — especially for dependents of deceased earners.
Laid down the definitive multiplier table and clarified that personal expenses should be deducted at 30% unless evidence shows otherwise; affirmed that income must be grossed up for tax and inflation where appropriate.
Reiterated that compensation must be just and realistic — not merely symbolic — and upheld the use of 7% interest from date of application, plus future prospects adjustment for salaried persons under 40.
What to Do
File a claim application before the local Motor Accidents Claims Tribunal (MACT) within 120 days of the accident.
Submit proof of income (salary slips, IT returns), medical reports, death certificate (if applicable), and dependency evidence (family records, affidavits).
Compute approximate compensation using the multiplier method: (Annual Net Income × Multiplier) + funeral/medical expenses + interest.
Engage a lawyer familiar with MACT procedures — especially for appeals or disputes over income assessment or dependency.
Sources
Not legal advice. This article is general information based on publicly available sources, written for educational purposes. Laws change and individual situations vary. Consult a licensed attorney in your jurisdiction before acting on anything you read here. Last reviewed: 2026-06-08.