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Sunday, June 29, 2008

Persons in receipt of disability pension are entitled to Income Tax exemption on entire pension

This blogger has received many queries on the question of Income Tax exemption on disability pension. The most frequently asked question is whether this IT exemption is applicable on just the ‘disability element’ of pension or the entire pension.

Most do not know that ‘disability pension’ consists of two elements – Service Element (also known as Service Pension) & Disability Element. Service Element is granted in accordance with the length of service rendered but subject to a minimum amount. Hence when a person has completed pensionable service (15 years for PBOR and 20 for Commissioned Officers), his / her service pension is his / her service element. Even if a person has not rendered pensionable service, he / she is entitled to ‘service element’. To take an example, in a case where a PBOR has been invalided after just one day of service, he is still entitled to ‘service element’ which would be atleast granted @ Rs 1913 per month at 5th CPC rates (plus applicable DA of course). The other element of disability pension is ‘disability element’ which is granted in accordance with the percentage of disability suffered. No disability element is granted to individuals having a disability below 20% however such individuals are still entitled to receive the service element.

The Ministry of Finance has confirmed that Income Tax exemption is available on both elements, i.e., disability as well as service elements of disability pension. Hence the entire disability pension (service pension / element as well as disability element) continues to remain non-taxable.

A copy of the clarification by the Ministry of Finance is available here

51 comments:

Gp Capt BV Rao( Retd ) said...

Many thanks for this information.Kindly make available a copy of the Min of Fin reference; What is the effective date? Certain anomally in the rate of disability Pension, I want to bring to your notice.In r/o personnel superannuating with more than 20% disability attributable to service,disability element recommended by the 5th CPC are, for 100% disability:
30% of basic pay for Civilians vide para 135.17-Catagory 2B whereas, defence forces has sought flat rates eg.Rs. 2900/= for officers & CPC recommended @ admissible family pension(Viz.30%)(Vide Para164.1,164.6&7).However,Service Officers are paid @ Rs. 2600/= ie. less than what has been sought while @ 30% of pay would have been more beneficial.Could you know at rate the civilians are actually paid? Why the services have asked for lesser rate? Would this anomally continue in the acceptance of 6th CPC(Paras 5.1.66 to 68 of report refers).I seek your advice on my steps to get at 30% wef 1996.

Anonymous said...

Is it possible to get pension if the person is fully Fit & Earning a sum of money 50000 Rs Monthly. He was working In Infentry service for a period of 2-3 years.while on duty he met with a accident in Horse Ridding..!

He produced fraud medical certificate stating thathe is not fit for duty.

SATISH PATIL said...

Col S.P.PATIL (RETD) said....MAJ NAVDEEP, YOU ARE DOING YEOMEN SERVICE FOR THE BENEFIT OF DEFENCE PERS,BOTH SERVING/RETIRED. ABS PROUD OF YOUR DEDICATION. MY DOUBT.. I HAVE RETD WITH 40% DISABILITY. AM I ENTITLED FOR COMPLETE EXEMPTION OF SERVICE,AND DISABILITY ELEMENT OF PENSION ? FINANCE MINISTRY, CLARIFICTION DT JULY 2002, DOES NOT SPECIFY THE PERCENTAGE OF DISABILITY.

Navdeep / Maj Navdeep Singh said...

@Col Patil

Sir,

Yes, complete disability pension incl service pension/element is exempted from IT. When it is stated that the entire pension is not amenable to IT, there remains no requirement of mentioning the percentage.

Regards

NS

SANTOKH said...

Dear Maj Navdeep,
I have gone through the authority posted as link for exemption of disability pension as INSTRUCTION NO 2/2002 --F NO .200/51/99-ITA.1
GOVT OF INDIA MIN OF FIN DEPT OF REV CETRAL BOARD OF DIRECT TAXES.
NEW DELHI,DATED 2 JULY 2002.
I have been given a photo copy of this Instruction by a brother officer which is duly signed by B.L.SAHU,OFFICER ON SPECIAL DUTY(ITA)and this Instruction No is 2/2001 dated 2nd July,2001 and not 2/2002 dated 2nd July,2002
Although the wording in both instructions is the same ,there are few spelling mistakes in the one on your site.It is also not a signed copy.
I request you to kindly guide me on the following :-
1.What auth one should mention in IT return form to claim this exemption INSTRUCTION NO 2/2002 DATED 2nd,July,2002 or 2/2001 DATED 2nd,July,2001?
2. IT Section under which the exemption to be claimed in IT return.
Thank You
Lt Col Santokh Singh Bhatia ,Retd
2. Under what IT section this is to be

Anonymous said...

Dear Maj Navdeep,
This is with regards to income tax exemption on disability pension.

I find one blog from LT COL SANTOKH Singh(Retd) referring to authority as Instruction No is 2/2001 dated 2nd July,2001 and not 2/2002 dated 2nd July,2002. Would you clarify on the subject. Also, if authority is Instruction No 2/2001 could you provide copy of same if possible signed one by Mr BL SAhu , OFFICER ON SPECIAL DUTY(ITA).

From Col YS Negi (Retd)

Anonymous said...

Dear Lt Col Santokh,

Well if you could send me copy of authority referred by you ie Instruction No 2/2001 of 02 Jul 2001 duly scanned. Thanks in anticipation.

My e-mail arunnegi2006@yahoo.co.in

LT COL PS PRAKASH said...

My dear Major Navdeep, hats of to your sincere yeomen service for the benefit of Service personnel by providing various informations, rules/regulations which most of the pers are not aware. I am sure most of the offrs who are in receipt of disability pension, MUST BE paying IT due to ignorance. Now as our friend Col Santokh Singh pointed out about the confusion about the date of issue of Min of Fin letter, I request him to supply a copy of the same to you sothat it will benefit all pers who draw disability pension by submitting the copy of the same alongwith IT return.

jas said...

Those who need signed copy of INSTRUCTION NO 2/2001
F NO .200/51/99-ITA.I
GOVT OF INDIA, MIN OF FINANCE, DEPT OF REVENUE, CENTRAL BOARD OF DIRECT TAXES.
NEW DELHI,
DATED 2 JULY 2001.
may send me email
bhinderjs@gmail.com

Satish said...

Dear Maj Navdeep,
Many thanks for your reply to my query dt 12 Nov 08.However the IT auth in PUNE are NOT allowing exemption,on SERVICE ELEMENT, DEPITE THE MIN OF FIN, CIRCULARS.Are there any latest Govt Orders,to help me take up case with CIT,PUNE.
Regards,
Col.S.P.Patil
08 Jan 09

subu_gunner said...

MAJ NAVDEEP,
I would be greatful if you could guide to any of the retired officer who has availed this exemption on both sercice and disablity element of the pension.
Col Subu

Murty said...

from:col(retd)JRK Murty.I got a photocopy of hq Sothern Comd letter on the subject.letter no is 5401001/R/A(PS) dated 29sep2001.in this letter a copy of Central Board of Direct Taxes letter no200/51/99/ITA1 dt02jul2001 is reproduced.in this CBDT letter it is clearly stated "the entire disability pension ie disability element and service element of a disabled officer of the Indian Armed Forces continue to be exempted from income tax".it is also written in ink on this photocopy-auth :GOI Minstry of Finance (Dept of Revenue) letter no 200/51/99-ITA1 dt 06 may 2000. i am claiming exemption of income tax from financial year 2002-2003 at hyderabad and i am getting it till now.i am sure this will help other offrs also.

Anonymous said...

Col Tarlochan Singh Email Id coltarlochan@rediffmail.com. I am recipient of 30% disability pension and have beein claiming IT exemption for my entire pension since retirement wef FY 2005/06 vide the authority indicated herein this blog. I also gave this authority to one of My Air Force friend (Wg Cdr) who revised his previous three year IT returns and Got a refund of Approx Rs 62,000.00.

Col Metharu said...

Dear Maj Navdeep
I am med cat with 20% disability due to m/c accident in which I fractured my rt foot toes. later got 30% disability for hypertension. The med board are showing these as non-attributable. what is net disability - is it the aggregate of the two disabilities or the highest one. Will the release med board/ cda grant me disability as attributable or otherwise. Pl advice Iam retiring in 2010.
Col Metharu

yes said...

Dear Maj Navdeep,
Kindly clarify if the IT Exemption is applicable to superannuated disability pensioners also.
With rgards
Lt Col Krishan Chand(retd)

govind said...

I took PMR in Dec 2000 with Disability 30%. No disability pension is being granted to me. Please enlighten if my pension is exempted from IT, if so please quote so that i can endorse the same in my IT return for AY 10-2011.
shall be grateful for your reply.
Happy New year.
Lt Col G R Nihalani
31/12/2009

Navdeep / Maj Navdeep Singh said...

@Govind

IT is only exempted for persons who are in receipt of disability pension. Your pension is hence not exempt

subu_gunner said...

Dear Navdeep Singh,
Thanks for all the efforts to educate all of us on the little known subject. Pl do clarify that arrears recd by officers in receipt of disablity pension is also exempt from IT.
Col Subu

RAMRAJ.D said...

THIS IS RAMRAJ. I AM RESIDING IN TAMIL NADU . MY SERVICE IN INDIAN ARMY IS 22 YEARS.WHILE I AM RETIRED I WAS IN THE POST OF NAIK.I DONT HAVE A HOUSE TO STAY WITH MY FAMILY PERMANENTLY. IS THERE IS ANY FACILITIES TO THE RETIRED PERSON OF INDIAN ARMY REGARDING ACCOMMODATION?

Anonymous said...

I was looking for this letter, thanks you quoted it, it would be great if this is printed in retirement manual by AG's branch too.
vijay

Anonymous said...

Dear Maj Navdeep,

I am in receipt of disability pension.
Would sincerely request you for the appropriate authority (section under Income Tax Act) which can be quoted while filing the IT returns to avail this benefit.

Though I searched in the blogs to find this, but I couldnt find.

Thanks a ton for this great service that you offer to all of us.

Sqn Ldr (Retd) Pradeep Kumar

Anonymous said...

Dear Maj Navdeep

Wanted to know if this exemption from tax will be extended to the family pension (disability pension) also, post the death of the officer. Can the widow of the officer getting disability pension, claim this tax exemption?

regards

Anirudh Kaushik said...

Dear Maj Navdeep

Thanks for the information..

But I wanted a clarification as to ho can we intimate this in the ITR Saral form? Under what section of the IT act can we file an exemption for the disability pension (both service and disability element)?

Please provide a clarification on the same.

Thanks
Anirudh

Lt Col CK Kaushik said...

Dear Major Navdeep,
THANKS A LOT FOR VALUABLE INFORMATION.I am in receipt of 30 percent disability pension attributable to service conditions since I retired(01 Aug 1994)I gave copy of the It circular to state Bank of India with request not to deduct it on disability pension.The Bank deducted IT saying 30 percent disability pension is not exempt from IT.Kindly clerify and give authority if any at the earliest.Thank you.Lt Col(Retd) CK Kaushik,Bunglow No-91, MG Road ,Agra Cantt-282001-E-Mail chanderkkaushik@yahoo.co.in,Mobile 9411400822/9259418963.

Dr Viswanatham said...

Dear Col JRK Murty
I am Dr K.SViswanatham looking ofr Col JRK Murty who is from Signals and worked in Lucknow, Pune and Goa etc
His son studied in Satya Sai University, Puttaparthy. We know them closely but lost touch with them as we were abroad for the last 11 years.
Now we live in Pune and may be moving to Hyderabad.
I would like anybody knowing about Col JRK Murty to respond.

Regards
Viswanatham
wishvam@rediffmail.com
Mobile 0-8805594981

Anonymous said...

dear navdeep,
i am having disability pension and now i have taken reemployment with civil am i entitled for exemption of income tax on my present pay and pension or only on defence pension. please clarify.
machhral

Anonymous said...

Dear Maj Navdeep,
IT exemption (on entire pension ,for persons in receipt of disability pension) is questioned by IT deptt ,despite their attention being drawn towards CBDT letter dt 02 Jul 2002.
2.please advice,whom i should approach in IT deptt Chandigarh.
regards
Chandra

Raghu said...

May I know that the exemption of
Income Tax for
disability pension is allowed for
PBOR
Inthe order of the govt itis
clearly written that exemption is
allowed for disabled officers only
Ramachandran P . V
Ex 1373418A
Email ID pvriyer@gmail.com

Raghu said...

May I know that the exemption of
Income Tax for
disability pension is allowed for
PBOR
Inthe order of the govt itis
clearly written that exemption is
allowed for disabled officers only
Ramachandran P . V
Ex 1373418A
Email ID pvriyer@gmail.com

Col (Retd) Bharat Jhingon said...

Dear Major,

Needless to say you are doing a great job. Hope you can help with the clarification I seek.

Is the Dearness Relief on the Service and Disability Elements also IT exempt?

Please help out.

Regards & Best Wishes,
Col (Retd) Bharat Jhingon

rajesh said...

i m just retiring this month end. i m given 18% disability. what will b my service pension element as attributable and aggravated due to service conditions. after 32 yrs service what addl payment will accrue to me . approx. thnx.rgrds. col rk saxena

Anonymous said...

dear sir,

In view of recent circular of PCDA No 456
what will be the pension of a sepoy
who is drawing service element 3500/
and disability element 702/-

Yours faithfully
BC

Osho said...

I retired prematurely in Oct 2010. I am in receipt of Disability Pension. I am aware that disbaility pension qualifies for 100% tax exemption and I am in possession of the letter. However while filling the IT return, i am unable to reflect the same as I do not know the IT act section under which 100% disability pension is exempted. Definitely it is not 80U as 80U limits the exemption and is only allowed for certain disabilities.

Can Anyone help please..

Lt Col (Retd) Rajnish Bhatia

Anonymous said...

Dear Col Rajnish,
Please send me your Mail ID I shall let you know how to fill your IT form to claim tax exemption on your disability pension.
My mail ID is santokhsb@gmail.com
Regards.
Lt Col S.S.Bhatia,(Retd)

Col (Retd)A.K.Mehndiratta said...

Hi,
You are doing a great job,keep it up.
I was getting disability pension since May2008 with DA till I joined remployment in May 2009.Thereafter they stopped giving DA on disability pension till i finally retired in May this year.
i would like to know firstly is DA on disability pension applicable.Secondly ,if yes,who is to be approached to claim the arrears of DA for the period May2009 to May 2011.
In case of any clarification please contact me on 09999447972.
Thanks

Col(Retd) A.K.Mehndiratta

Pokar Ram said...

Doubt still persists ???
kindly visit ===http://www.scribd.com/doc/11603323/DP-exempt" and pcda websit under old orders/circulars

Pokar Ram said...

RBI has issued instructions to all agency banks to strictly adhere to the provisions of para 88.3 of Defence Pension Payment Instructions 2005, regarding exemption of Income Tax of the disability pension of the pensioners of Armed Forces. Banks have been advised that Income Tax should not be deducted from the disability pension paid to the pensioners of the Armed Forces.

Pokar Ram said...

http://news.oneindia.in/2007/12/20/rbi-issues-instructions-to-banks-1198161223.html

Pokar Ram said...

kindly read para 88.1 to 88.3 http://pcdapension.nic.in/oldsite/trngMat/ppi/Chapters.pdf

pragati arora said...

which section pertains to this provision?

Mohinder Singh Chandel said...

Sir,
I am Mohinder Singh, an Ex Serviceman & getting 20% disability pension. I shall be thankful if you send me a copy of letter No. 200/51/99-ITA-1 for availing the benefit of IT. on my disability pension. My E.mail ID is mschandel.acf@gmail.com
Jai hind.

opmehta said...

Dear Maj Navdeep
You are doing a wonderful job for the fellow officers by updating thru this blog and keep it up!!!!!
I have gone through the authority posted as link for exemption of disability pension as INSTRUCTION NO 2/2001 --F NO .200/51/99-ITA.1
GOVT OF INDIA MIN OF FIN DEPT OF REV CETRAL BOARD OF DIRECT TAXES.
NEW DELHI,DATED 2 JULY 2001.
I have been given a photo copy of this Instruction by the bank where I have my pension account which is duly signed by B.L.SAHU,OFFICER ON SPECIAL DUTY(ITA).I request you to kindly guide me on the following :-
1.What authority one should mention in IT return form to claim this exemption.
2. IT Section/ instruction under which the exemption to be claimed in IT return.
3. Can i get the refund of income tax paid for all these years.
Kindly reply me for the same my email id is mehtaop47@gmail.com

regards
Lt Col(Retd) O P Mehta
09999854862

afsar khan said...

dear sir,
I am getting disability pension having 70% of disability.I have completed 9 & half yr of my sevice in corps of signals.I am getting disability pension + service element.I was signalmen at the time of my invalided board out on medical groud .my disability is attributable to mil service.now I am re-employed in central govt service.plz give me a favour to know about that am i entitle for exemption for my pension or not.

thanks
with warm regards
ex-sigmn
afsar khan

my e-mail id -

afsarkhan.ansh@gmail.com

skdking said...

1. Can a person get Disability Pension if he got absorbed in another central government organisation on same pay and is not in receipt of any pension?
2. What is the authority or reference for such cases?

Any guidance will be welcome.

Anonymous said...

Col Marakkar(Retd)

I am a superannuated colonel(Jun 2006) having granted service pension and 30 % disability pension being LMC due to Hypertension.Is my pension exempted from income tax? If yes can I claim for the refund of Income tax already paid in the past without knowing the above rule? Please clarify

Thanks

Col Marakkar

pratap11singh@yahoo.com said...

I am Col Pratap Singh (Retd)2010 atfter attaining age of superannuation (54 yrs) . Setteled in Lucknow. I am a battle casualty getting 40% war injury disability pension.is exemption on IT on disability pension (Service &disability elements) applicable to those persons who are invalided out of service only or to those also who retire on superannuation after completing full tenure. Kindly tell the relevant section of IT under which i can claim this exemption. my email id - pratap11singh@yahoo.com

Kanwaljit Singh Dhunna said...

Sir,

As you said "A copy of the clarification by the Ministry of Finance is available here"

The link is not working. Kindly update the link.

Regards
Kanwaljit

Brig V Rajagopal(Retd) said...

Dear Maj Navdeep,
Thanks a lot for this very useful information. I get 'Disability Pension' for 20 percent disability. I seek two clarifications from you on this subject.
(a) What is the Para/Sec of IT Act under which the exemption has been granted, so that the same can be quoted in the IT Return?
(b) Is only the 'Disability Pension' exempted or even the other normal 'Service Pension' also exempted from IT? For eg, if one is getting a service pension of Rs 42,000/- p.m. & disability pension of Rs 5,000 p.m., both incl DA, is the entire amount of Rs 47,000/-exempted or only Rs 5,000/- is exempted? The terminology 'Service Element' is not very clear & hence the doubt.
With Warm Regards, Brig V Rajagopal(Retd)

Sharky said...

Sir,,
I am also receiving disability pension for 50% disability attributable to service. Presently, i am working in a public sector bank. I have got my Form 16 from my present employer after TDS. My doubt now is...whether my pension needs to be shown as ADDITIONAL INCOME while filing returns. and whether my disability element of pension is exempt from IT..or is the whole pension exempt from IT because of the disability element in it. ?

Anonymous said...

Dear Admin

Please enlighten on the issue that whether disability pension of an army jawan(Not Officer) is also exempt from income tax.

partho chakravorty said...

Dear Sir
I am ex sergeant and invalided out from service with 20% disability ,kindly any one send me the copy of tax exemption on entire disability pension.
Regards
partho chakravorty