Military upset over disability pension tax

NEW DELHI: The finance ministry has ruled that the disability pension being given to military personnel will now be taxable unless they were forced or “invalidated” out of service because of the disability sustained in service, leading to some disquiet among the armed forces and veterans.

The Central Board of Direct Taxes (CBDT), in its circular issued on Monday, said it was clarifying that “income tax exemption” would continue to be available for all Army, Navy and IAF personnel who have been “invalidated out of service on account of bodily disability attributable to or aggravated by such service”.

But, it added, such tax exemption would not be available to personnel “who have been retired on superannuation or otherwise”. This, in effect, means the personnel with some disability who retire after full service in the normal course will no longer get tax exemption on their disability pensions.

Military officers said this was yet another new way to cut down benefits of the armed forces because disability pensions – which is in addition to the normal pension given as per rank -- for superannuating personnel have never been taxed before.
Moreover, the circular is silent on the date from which the order will be effective, and whether it will be retrospective or prospective. “The finance ministry and CBDT contend they are just clarifying or interpreting the existing rules based on some representations they have received…the move is clearly mischievous,” said a veteran.
It is also true that the provision for disability pension has been misused by some personnel over the years, with even a few top military officers getting disability certificates just days before their retirement to get higher pensions. Even the 7th Central Pay Commission (CPC) had questioned the jump in disability pension cases, especially in senior ranks, after the previous pay panel had substantially hiked the payout for them.
“But a few aberrations should not lead to such an illogical step to penalize everyone. There have been examples like Major General Ian Cardozo and Lt-Generals Vijay Oberoi and Pankaj Joshi, among others, who chose to carry on in service despite losing their legs and rose to high ranks,” said another veteran.
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References

1. ^{^} finance ministry (timesofindia.indiatimes.com)
2. ^{^} disability pension (timesofindia.indiatimes.com)

from Times of India http://bit.ly/2X9pGAD