New Delhi: The disability pension given to military personnel will be taxable unless they’re forced out of service due to the disability sustained in service, the finance ministry has ruled.
A circular issued by the Central Board of Direct Taxes on 24 June has clarified that tax exemption for disability pension will be “available only to armed forces personnel who have been invalidated from service on account of bodily disability attributable to or aggravated by such service and not to personnel who have been retired on superannuation or otherwise”.
An Income Tax official told ThePrint by way of explanation: “Those who retire after full service with some disability will not get income tax exemption. This has always been the position, but there have been instances wherein income tax exemption has been availed by those who retired with disability. This notification seeks to provide that clarification.”
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‘Wasn’t taxed before’
However, the order has caused much heartburn among servicemen. Many say this is a new move, and argue that there were never any taxes on disability pension.
“This is absolutely absurd. The disability took place while serving the nation. No one likes to see himself disabled, and this tax being levied on disability pension is like rubbing salt into the wound,” a serving officer told ThePrint.
A retired officer who deals with a host of issues for service personnel said that disability pension was not taxed until now, and that the finance ministry is now “twisting it”.
“Now they have interpreted it to mean that only ‘invalided’ individuals will be granted exemption. However, the catch here is that as per military pension rules, any person who is in low medical category at the time of release from service is treated as ‘invalided’ for the purposes of disability pension,” the retired officer said.
“Hence, even those persons who are released in low medical category on completion of terms or superannuation are deemed to be ‘invalided’ for the purposes of disability pension as per rules.”
The current scheme
Under the current pension scheme, a colonel-rank officer retiring after full service would get a pension of about Rs 1,02,000 per month. If the officer has been disabled during his service, he is graded in a percentage system by the medical board.
“The rule for civilians as well as uniformed personnel is the same when it comes to disability pension: For 100 per cent disability, 30 per cent of pay becomes the disability pension. It is proportionately reduced for lesser percentage of disability,” a former officer explained.
There have been cases in the past when officers are alleged to have misused the scheme to avail disability pension at the time of retirement. The most famous is a former Army chief getting a disability certificate for low hearing just days before his retirement.
Earlier this month, in a first of its kind case, a retired Major General was found guilty of falsifying medical records to earn disability pension and was sentenced to a loss of 10 years’ service for pension.
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Matter of friction
The disability pension has been a matter of friction between the armed forces and the government.
There was widespread criticism from opposition parties and the military establishment over a letter issued on 30 September 2018, which had introduced a slab-based system, as recommended by the Seventh Pay Commission, for determining the disability pension for defence forces.
Following this, the defence ministry had referred the matter to the Anomaly Committee.
However, there was confusion as to what system would be used to determine disability pension.
Later, it was decided that until the committee comes out with a report, the existing percentage system will be used to determine disability pension.
This was ultimately resolved when the committee submitted a report stating that the slab-based system had caused an anomaly between civilian and military employees. The government had then issued final orders restoring the percentage-based system for military personnel, at par with civilian employees.
Military personnel were upset about the fact that civilians will continue to be paid pension according to the earlier ‘percentage system’, which means that civilian employees will get higher disability pension than their military counterparts.
In January this year, the defence ministry said that disability or war injury pension for armed forces personnel shall be a minimum of Rs 18,000 per month.
With inputs from Remya Nair
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This report has been updated with details of the anomaly committee’s report.
V K Mahajan
27 June 2019
As per military pension rules,any person who is in low medical category at the time of his release from service is treated as” Invalidated” for the purpose of disability pension. Hence even those persons who are released in low medical category on completion of terms or Superannuation are deemed to be “Invalidated for the purpose of disability pension as per rules. Thus entitled to disability Pension tax benefit . Exservicemen in receipt of Disability pension whether after completing full service in low medical category or invalidating out have never been taxed on disability Pension .
(2) In a clarification sought by Army HQ, the CBDT vide their letter no 200/51/99-ITA-I dt 6/5/20
00/ has also clarified that for a person in receipt of DISABILITY pension his full disability pension ie service element & disability element both are exempted from income tax.
(3) The circular para stating that it is only clarifying the existing rule is therefore not understood.
(4) If there are any culprits trying to hoodwink the system & manage disability for tax benefits, surely they can be identified by adding checks & balances in the system& given severe punishment.
Punishing each & every one down the line is not appropriate & will highly lower the morale of Armed forces who will think twice before taking any risk in war/peace .
Hope the circular will be reviewed & withdrawn.
I suggest FM to impose an additional penalty of 10℅ on Retiring Pension of all Soldiers,for the mistake they have done by joining the services.
Indeed deplorable. Soldiers injured in operations or battles / skirmishes on borders too will be paying taxes for disability pension earned due to loss of limb or other disability.
How much will Govt be able to earn / save by such things? Is this the love displayed by the Party that asks votes for soldiers who sacrificed their lives.?
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