On Tuesday, a circular was issued by the Central Board of Direct Taxes (CBDT) which stated that disability pension given to military personnel will be taxable.
Defence preparedness and the interests of the armed forces personnel are the topmost priorities of the government, says defence minister Rajnath Singh.
During the Zero Hour in Lok Sabha, the minister gave assurance to the House that he will look into the matter related to imposing tax on Disability pension for military personnel.
On Tuesday, a circular was issued by the Central Board of Direct Taxes (CBDT) which stated that disability pension given to military personnel will be taxable. And made it clear that it will not be taxed unless they leave the service due to the disability sustained in service.
The order has stated clearly 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.”
Referring to this the minister said that “I will look into the issue. The ministry is gathering information and will get back with details to the House”.
Presently, personnel of the Indian armed forces who suffer any kind of disability while in service they receive separate disability pension.
Facing criticism, senior officials had earlier this week justified stating that personnel who retire after serving the full tenure with some disability will not get income tax exemption. And pointed out that the latest order clarifies that there were cases where income tax exemption was availed by those who retired with disability.
According to officials, however, in the past, there were some cases when some personnel misused the exemption scheme to avail the disability pension while nearing retirement.
Typically, any person who has suffered 100 per cent disability or up to 50 per cent, they usually leave the service unable to serve and they are the ones who get a lifelong tax-free pension which is based upon their rank and last salary drawn explained officials.
War and Normal disability pensions were not being taxed if the disability is decided by a team of doctors, therefore there are some ambiguities in the CBDT notification. While it is not clear when will the order will become effective, officials said that it was also not clarified in the order whether pension will be taxed with retrospective or prospective effect.
What is the Disability Pension?
It is of two types: war and normal.
War disability is 60 percent of the last salary drawn in case of 100% disability.
Normal disability is 30 percent of the last salary drawn in case of 100% disability.