Disability pensions in the Indian armed forces will continue to be exempt from tax, Union defence minister Rajnath Singh has conveyed to senior government officials, effectively rolling back a recent order that brought the provision in the tax net.

At the same time, however, the minister has called on the three services – the Indian Army, the Indian Air Force and the Indian Navy -- to device a mechanism to reduce instances of misuse of the rules, according to people familiar with the developments who asked not to be named.

“It was felt that a one-size-fits-all policy would be unfair,” said a senior official who asked not to be named, explaining the reason behind rolling back the move. “The minister has taken a serious view of the misuse of disability pension, especially by senior officers including generals in the past. However, he believes that people with genuine disability because of service should not be made to suffer.”

On July 8, the defence minister had told the Rajya Sabha that the decision to go back to exempting disability pension from being taxed was under the consideration of the ministry.
 

Orders to reverse to the process have been issued. At the same time forces have been asked to work out a formula to handle instances of the misuse,” added the official cited above. HT has not seen a copy of the order.

According to a June 24 notification by the finance ministry, disability pension and the pension of soldiers who have served their full tenure with the three services would no longer be exempt from income tax. The order said only soldiers who have been “invalidated” during military service will get exemption.

The Indian Army, the largest

of the three services, had welcomed the move on the grounds that the force is witnessing a worrying trend of more soldiers seeking disability pension for monetary benefits even when their medical condition is an outcome of their lifestyle.

But it sparked a row in the military fraternity, with several veterans and experts opposing the move. They contended that the problem was exaggerated and that people suffering from genuine disabilities should not be made to suffer due to the actions of a few unscrupulous people.

In the current fiscal, the government has allocated ~1.12 lakh crore for defence pensions alone. Around 11.2% of Indian Army officers, including generals, and 0.8% of troopers receive disability pensions. There are about 2.5 million retired soldiers in India.

A medical downgrade entitles a soldier to better retirement benefits. On average for the same rank, a disability pension can be 20 to 50% more than a normal one, plus tax exemption.

The 6th Pay Commission in 2006 hiked disability pension to bring parity with other services. The 7th Pay Commission, however, observed that there was a huge jump in disability pension cases, especially among the senior ranks.

A recent analysis by Army HQ showed that a large number of officers, including generals, and those in the medical corps had claimed disabilities for non-physical injuries such as hypertension, diabetes, hearing loss, obesity-linked diseases, and other ailments.
Source: https://www.hindustantimes.com/india-news/government-to-roll-back-tax-on-disability-pension-for-forces/story-O44tr2ud45l16wcAdRpc4J.html