Exemption of Income Tax - Defence Pensioner Drawing Disability Pension

ENTIRE AMOUNT OF MILITARY PENSION IS EXEMPTED FROM INCOME TAX IF YOU ARE DRAWING DISABILITY PENSION

1.     The tax exemption of disability pension received by  Armed Force Personnel  are among those  exemptions under Income Tax Act for which you may not get a direct reference in  the Income Tax Act. However ,  such tax exemption are allowed by the executive instruction issued by either Finance Ministry notification or under the delegated powers to CBDT . 

2.       Armed Forces personnel get the disability pension which is basically aggregate of two components-disability pension and service pension.  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. 

3.    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.