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Thursday, February 5, 2009

Please sensitise the environment : No Income Tax on the entire pension / arrears of gallantry awardees, their families & disability pensioners

Flash : For the first time in history, the Territorial Army (TA) marching contingent has been adjudged the best marching contingent this Republic Day. As a concept, the Territorial Army is an organisation of volunteers who serve in a military environment for a few days each year during their spare time so that in case of an emergency they can volunteer to bear arms for the nation.

Though I’ve time and again harped on this here on the blog, if you have friends or family who are gallantry awardees or disability pensioners, please do tell them to inform their banks that Income Tax is not chargeable on their pensions. Also the entire pension arrears received after implementation of the 6th CPC are exempted from Income Tax for disability pensioners and gallantry awardees / family pensioners of gallantry awardees. It seems that banks are not in the knowledge of such exemption and are blatantly deducting IT at source even in cases of disability pensioners and gallantry awardees. Besides educating the affected pensioners, we must also sensitise the banks of these very important exemptions.

Income Tax exemption on complete pension of disability pensioners

The entire pension, that is, service element (service pension) and disability element of disability pensioners is exempted from the purview of Income Tax. Disability Pension comprises of two elements, service element that is granted in terms of the length of service (subject to a minimum amount in cases where service rendered is less than pensionable service), and disability element which is granted in terms of the percentage of disability. There is no minimum qualifying service prescribed for service element or disability element, hence even if a person has a single day of service, he or she is entitled to disability pension. For individuals who have completed their minimum qualifying service for pension, their service pension becomes the service element for purposes of disability pension. Both elements are exempted from Income Tax and so are the arrears of both elements. The same has been clarified by the Ministry of Finance, Department of Revenue vide Instruction No 2/2001 dated 02 July 2001 and Instruction No 136 dated 14 January 1970, both of which can be viewed and downloaded by clicking here.

Income Tax exemption on complete pension of gallantry awardees

With effect from Assessment Year 2000-2001, the govt through the Finance Act, 1999, had introduced complete IT exemption on the pension and family pension of gallantry awardees. This was brought into force by way of introduction of Section 10 (18) of the Income Tax Act. The complete pension of such awardees (and not just the gallantry element) is exempted from IT. Following was the press release from Mr Yashwant Sinha, the then Finance Minister when this was introduced in the union budged (1999-2000) :

“To recognise the services rendered by the members of defence forces who have been awarded the Param Vir Chakra, the Maha Vir Chakra and the Vir Chakra the pension and the family pension of the gallantry award winners will be exempted from income tax. Similar exemption would also be available to other gallantry award winners, to be notified by the Central Government”

Accordingly, apart from the Chakra Series, the govt notified several other awards which are under the purview of IT exemption. The complete notification and list of such awards can be viewed and downloaded by clicking here.

Section 10 (18) of the Income Tax Act is reproduced below :

Section 10

In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included :

10 (18) : Any income by way of - (i) Pension received by an individual who has been in the service of the Central or State Government and has been awarded "Param Vir Chakra" or "Maha Vir Chakra" or "Vir Chakra" or such other gallantry award as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(ii) Family pension received by any member of the family of an individual referred to in sub-clause (i)

I would request all readers to ensure dissemination to affected individuals and their families. If tax has already been paid or deducted then a refund should be applied for.


Gaurav Dutta said...

Dear Maj Navdeep,
Kudos to you for your efforts, thanks also. Please tell me as to why the transport allowance granted to disabled serving officers is taxed? That portion of the salary should be tax exempt.

Gaurav Dutta

Gaurav Dutta said...

Dear Maj Navdeep,
Kudos to you for your efforts, also thanks. The transport allowance granted to disabled serving personnel is taxed. Why? Half of it and the DA on it should be exempt, if not the whole thing.
Gaurav Dutta

Anonymous said...

Thanks for enlightening us Kuan ka Mendhaks, Navdeep bhai!

ASK said...

Dear Navdeep,
Since the subject matter has been raised by you,may we once again request you to let us know the status on revision of rates of Disability Pension as per 6CPCR.

Anonymous said...

Hi Navdeep

Could you also please clarify if family pensioners are also exempt if the deseased pensioner was in receipt of "disability" pension ?

Anonymous said...

My intptn of the exmptn is that service pension of only those offrs who are invalidated out of svc is exmpt.Superannuated offrs service pension is taxable.

Navdeep / Maj Navdeep Singh said...

@Paramjit at 1.39 PM

Sorry to say but your contention and interpretation is absolutely incorrect. In fact the orders are so clear that there is no scope of 'interpretation'.

Firstly, is there anything in the Min of Finance letter which prohibits such benefit to personnel who have superannuated with a disability element ?. No, not at all.

Secondly, please go through Regulation 179 of the Pension Regulations for the Army, Part-I, 1961. The said Regulation should put your doubts to rest.

Anonymous said...

The definition of disabled officer given in income tax rules is who has disability of 40 percent or more. Hence provision of income tax exemption for personnel with less than 40 percent disability is doubtful. Moreover under which section of IT rules it is covered?
Please clarify. Thanks.

Navdeep / Maj Navdeep Singh said...

@Anony at 9.02

That is the definition of a disabled (handicapped) person which is different from the exemption on DP to defence personnel. (40% or is it 50% ??- let me check !)

Where is it mentioned that defence personnel need to have 40% dsblty to claim IT exemption ? Nowhere in the relevant letters is that mentioned.

Anonymous said...

The disability pension is not mentioned in the List of Income exempt from income tax. The IT authorities are not agreeing for exemption of DP as nowhere it is quoted in IT rules. The instruction/letter on DP not held with them. Kindly quote latest rules on the subject to convince IT authorities. The 40/30/20 percent of disability is not a concern. Thanks.

Anonymous said...

Navdeep Sir,
I am having 40% percent disability but still retained in service. Am I exempt from any kind of IT?
Pl clarify.

Navdeep / Maj Navdeep Singh said...

@Anony at 10.44

I have placed on the blog the authority for exemption. Please take a print out and place it before the IT authority or your bank. The exemption is under a notificaiton of 1929 and not under the IT Act.



Anonymous said...

Congratulations to the TA on winning the best marching contingent!

Were they from 124 Inf Bn (TA) in Delhi?

Navdeep / Maj Navdeep Singh said...

@Anony at 2.08

No, the contingent was from the Punjab TA : A mix of tps from 102 TA (my bn !!) and 150 TA

Bharat Sinh said...

Dear Maj Navdeep Singh, congratulations on the magnificent job that you're doing. Its great that you have taken on such a herculean task. Could you please let me know if there have been any changes in the disability/ War injury pension? There does not seem to be any info on the same anywhere

Bharat Sinh said...

Dear Maj Navdeep Singh, can you let me know if there is a difference in the service element of the war injury pension of a regular officer and a short service officer boarded out of service prior to 1996 (I was boarded out of service in 1982). Quite an anomaly I feel as anybody boarded out of service before his tenure should be treated equally

Anonymous said...

My Dear Navdeep,
I seek a clarification as regards to status of erstwhile time scale Lt Cols
Lt.Col.(TS)who were de facto Majors with marginal enhancement in their pay.Now consequent to Ajay Vikram Singh Committee report promotion to Lt Col rank is by time and not by Selection and they all have been placed in PB 4.Will the veteran Lt Col (TS) be also placed in PB4 or PB3

Anonymous said...

Income tax exemption for gallantry award winners is great news but the list does not include MC awardees.Can you confirm if they are also exempt from paying income tax. The info is reqd by Mrs Uberoi W/O late Brig Uberoi. I will be extremely grateful.

Anonymous said...

Dear Maj Navdeep,

Thanks for the service. Could you kindly let me know whether the widow's pension of a war casualty(Fatal)is exempt from income tax

Anonymous said...

Are there any provisions for exemption for family pension from income tax in r/o disability pensioners ?

Anonymous said...

Navdeep Sir,
Is there anyway to have Service Element & Disability Element of Disability Pension included under the List of Income Exempt from Income Tax by taking it up to IT authorities? No one may listen to a pensioner on this issue. It is also heard that IT has been deducted while making payment of 6th CPC arrears of disability pension to pensioners.

IT-Payyan said...

Dear Sir,
I took a printout of this blog and showed it at the Bank. They were convinced a person getting disability pension is indeed exempt from income tax on the service pension component too! You saved my dad from some real tax burden at the year end.


Lt Col R Pandey said...

Dear Major Navdeep, Thanks a lot for the invaluable information once again. I have taken the printouts regarding Tax Exemption for persons retired with Disability Pension. However, it is not possible to download the two letters of the Tax department as they appear to be protacted from download. Is it possible for you to make these available for download. Regards.

Unknown said...

I am a receipient of VM(Gallantry). The railways give travel concessions to 'Chakra' awardees. Vide a MoD letter VM(Gallantry) is entitled for benefits available to 'Gallantry Award' recipient. In absence of clarity if VM(Gallantry) is included for these benefits, railways do not accord similar benefit to VM(Gallantry) recipients. Are you aware of any clarification on the subject? Could you please guide me.

Gp Capt Sudhir V Bal(Retd)

RK Sachar said...

If an income tax assessee is suffering from cancer, the maximum deduction from income tax is Rs 40,000/- for the complete finacial year under section Section 80DDB. (Please visit :- http://taxworry.com/can-cancer-patient-get-income-tax-relief-us-80ddb-despite-insurance-claim/) So how is it logical that a superannuating officer from the Army who has got a mild hearing problem and has been placed LMC and granted 30% disability and whose annual pension may now be in the range of Rs five lacs plus per annum should get a 100% exemption on the entire pension? Does not seem logical and law is nothing but logic! In my opinion, only if a person is invalidated out of the Army due to disability, maybe only then he is entiteled to 100% exemption on entire pension. Maybe that was the intention initially and is now being interepreted differently. Please do guide us on this issue as it is assuming important diemnsions these days.

Anonymous said...

Dear Maj Navdeep,
I wish to join territorial army. i want to know if the pvt company iam working has any obligation to accept its employees to join TA, also does it have any tax benefits in order to promote its employees to join TA.

Col(retd) P B Chowdhury said...

Dear Major Navadeep

Thanks for efforts in enlightening us on various defence issues.We are grateful to you.I have too issues.Request you to help me.
My son was boarded out from NDA with 20 percent disability and awarded exgratia award with Rs375/-per month which has increased in subsequent pay commission and DA increases.
Is the amount exempt from IT.Since it was not more than 20 percent he does not get disability pension.
Though he was getting equivalent to minimum pension he has not been given enhancement pension announced.Is he entitled.

Col(retd) P B Chowdhury


Dear Maj Navadeep
thanks a lot for good information please let me know exactly serving Officer Got MVC award and getting 5000/- pm , will he get tax benefit? if yes on which amount? Present salary + award amount , please give clear picture and act also.
thanking you

ashok sharma said...

Dear Maj Navdeep,
Please let me know whether "Mention-in Despatches " is exempted from income tax.

Col Ashok Sharma

Kanwaljit Singh Dhunna said...

Dear Major Navdeep,

Great Service to Community Indeed !
But the benefit is being diluted to a great extent as we are not able to download the circulars / notifications from the Scribd.com as that is a paid service and so the same can not be downloaded.

Can you post some other link where it can be downloaded easily.

Anonymous said...

The exemption to disability pension is available to the members of His Majesty's Indian Armed Forces and not to the members of Armed Forces of Union of India. Serial No. 29 of the Notification is reproduced below:
"(29) Pension granted to members of His Majesty's Naval, Military or Air Forces, British or Indian, or of the Auxiliary Force, India or of the Indian Territorial Force, or of the Royal Indian Marine, who have been invalided from service with such forces on account of bodily disability attributable to, or aggravated by, such service."

The clarifications given by the CBDT, MOF, New Delhi use the expression “Indian Army” or “Indian Armed Forces” which refers to the members of His Majesty's Indian Army or His Majesty's Indian Armed Forces as the use of such expressions to refer to the Army or the Armed Forces of Union of India has been discontinued with effect from 26th January, 1950. Thus, there is difference is the expression “Indian Armed Forces” and “Armed Forces of Union of India”. The exemption is available only to the members invalided out of service.

Flt Lt Devinder Sharma (Retd)
E Mail: dee_sharma@ovi.com

Unknown said...

Dear Sir,
My father is in receipt of disablitiy pension which is exempted from IT. He does not have any other source of income. May I know how to fill ITR in this case.
With regards, Ravinder Singh

Unknown said...

Dear Navdeep,
I am COL RM Chaudhri(Retd),Engrs. There is a message being circulating regarding the above subject, I.e there is an amendment that Income tax exemption is only for Offrs/Jcos/OR who have been invalidated out of service and not to those who have had normal discharge I.e superannuation.
Request if you could throw some light. Says amendment is of 05 Jan 2016.
Warm Regards.

Unknown said...

Dear Navdeep
My father his been invalidated out of service which is NANA type. He was boarded out of service in 1988, he is receiving monthly pension for his 13 yrs of service. The disability shown on papers is 40% . Can I claim No Tax/ exception on his pension . He's receiving only the service element of the pension . Because the pension receiving bank has been cutting TDS from his pension and arrears.
Would be grateful if you could explain if its tax free or not.

Love & Regards
hesh Mishra