Veterans' income tax exemption

Indian Military Veterans

Veterans' income tax exemption

For veterans who receive disability benefits, all military pensions are exempt from income tax. Some people may wonder, "I receive both an employee pension and a disability pension, but can I still receive a pension?" So, are both pensions tax-exempt, or is only the disability pension tax-exempt? Read the article to the end for a detailed explanation.

A disability pension consists of two elements: a working element and a disability element. A person receiving disability pension is also exempt from paying income tax on the entire amount of disability pension. A person who has not completed the minimum period of service to qualify for pension is not entitled to service pension. He can receive disability pension or disability pension.

What is disability pension: If the disability is not due to military service or has been aggravated by military service and the soldier has received military service before completing the minimum period of military service, i.e., 15 years in case of H. JCO/OR and 20 years in case of Commissioned Officers, then at the time of discharge the soldier is entitled to disability pension. A minimum of 10 years of service is required to receive disability pension. However, from July 2019, disability pension is also available to those who are totally incapacitated due to disability and have not yet completed 10 years of service as a military or civilian employee.

Yes, the full pension amount. H. Service share (equivalent to service pension) of all ranks of the Indian Army and disability share of disability pensioners are exempt from income tax.

Disability pension – Disability pension consists of two parts: service portion and disability portion. If the years of service are less than the pensionable years of service, a service pension (equivalent to service pension) equal to 50% of the final pay is awarded and disability share is awarded depending on the degree of disability. There is no minimum period of service required for the service portion or the disability portion. Hence, even if you have served only one day, you are entitled to disability pension. In case of a person who has completed the minimum period of service required for pension, his/her service pension will be the contribution towards the disability pension.

Are both shares tax-exempt? – Both the shares are exempt from income tax as are the arrears on both the shares. This was clarified by the Department of Revenue vide Instruction No. 2/2001 dated 2 July 2001 and Instruction No. 136 dated 14 January 1970. The Government orders are reproduced below:

Instruction No 136
F. No. 34/3/68-IT(AI)
Govt. of India
Central Board of Direct Taxes
New Delhi, dated the 14th Jan 1970

From: Shri S N Nautial
Secretary, CBDT

To: All Commissioners of Income Tax

Subject: Exemption – Service and Disability Element of Disability Pension granted to a disabled officer of the Indian Army – whether exempted from Income Tax.

Reference is invited to the Board’s Letter F No 42/9/59-IT(AI), dated the 5th Sept 1960 on the above subject wherein it was mentioned that in the cases falling under Item (29) of Finance Deptt Notification No 878-F (Income Tax) dated 21-3-1922, the ‘disability element’ of the disability pension received by an officer of the Army will only be exempted from tax and that the ‘service element’ will be subjected to tax.

2. On reconsideration of the matter, in consultation with the Ministry of Law, the board are advised that item 29 of the notification does not differentiate between types of pensions. Accordingly in the cases falling under item 29 of the above notification, entire disability pension will be exempted from income-tax.
3. The above instructions may be brought to the notice of all assessing officers in your charge.

Yours faithfully,

Sd / – (S N Nautial)
Secretary CBDT