Disability Pension of all ranks of Armed Forces Personnel Exempt from Income Tax

The PCDA (Principal Controller of Defence Accounts – Pensioners) issued a circular on 20 February 2020 about the exemption from Income Tax on Service Element and Disability Element of Disability Pension granted to disabled personnel of Armed Forces who have been invalided out on account of disability attributable to or aggravated by Military, Air Force and Navy service.

The PCDA attached the Central Board of Direct Taxes (Department of Revenue) order No.173/250/2019-ITA-1 dated 24 June 2019 with the latest circular No. 210.

Income Tax on Disability Pension for Armed Forces

According to the CBDT order, Income Tax exemption to all members of Armed Forces who have been invalided for naval, military or air force service on account of bodily disability attributable to or aggravated by such service. Thus, income ­tax exemption under above clause would be available to all armed forces personnel (irrespective of rank) who have been invalided for such service on account of bodily disability attributable to or aggravated by such service.

Further, such tax exemption will be available only to armed forces personnel who have been invalided 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.

The order initially said, under the existing provisions of clause (i) of subsection 2 of section 297 of the Income tax Act, 1961 (‘Act’) any notification issued under sub ­section (1) of section 60 or section 60 A of the Indian Income Tax Act, 1922 (now repealed) and in force immediately before the commencement of the Act shall continue to be in force to the extent to which no provision has been made under the Act. Previously, in exercise of powers conferred under section 60 of the Indian Income Tax Act, 1922, vide Notification no. 878 F dated 21.03.1922, it was ordered at para 19 that “pensions granted to members of His Majesty’s naval, military or air forces who have been invalided for naval, military or air force service on account of bodily disability attributable to or aggravated by such service would be exempt from tax under the Indian Income ­ Tax Act, 1922?.

Click to view the CBDT Circular on Disability Pension