Exemption of IT to Armed Forces

Disability Pension to Armed Forces  

As per the website of Principal Controller of Defence Accounts (Pension), where an Armed Forces Personnel is invalided out of service, which is accepted as attributable to or aggravated by military service, he shall be entitled to disability pension consisting of Service Element & Disability Element as follows:-

Service Element

The amount of service element shall be determined as 50% of less emoluments drawn as given in para 6 of MOD letter dt- 12.11.2008 which is subject to minimum Rs 3500/- p.m.

Disability Element

·         The rates of disability elements for 100% disability for various ranks shall be 30% of emolument last drawn subject to Rs. 3510/- per month.

·         Disability lower than 100% shall be computed by reducing proportionately.

Disability Element on Invalidment

Where an Armed Force personnel is invalided out of service under circumstances mentioned in para 4.1 of Govt. letter dt. 31.01.01, the extent of disability shall be determined as follows for the purpose of computing the DE :- Percentage as finally assessed by Competent Authority Percentage to be reckoned for computing DE Between 1 to 49 50 Between 50 & 75 75 Between 76 &100 100

Disability Element on Retirement/Discharge

Where an Armed Forces personnel is retained in service despite disability and subsequently retired/ discharged on completion of tenure or on attaining the age of retirement, he shall be entitled to Disability Entitlement at the rate prescribed for 100% disablement. For disablement less than 100% but not below 20%, the rates shall be reduced proportionately. No disability element shall be payable for disability less than 20% .

Disability Pension to Armed Forces Tax Free 

Disability pension has been made tax free through Finance Ministry Instruction No 2/2001 dated 02 July 2001. The following instruction from CBDT explains that the entire disability pension is exempt

No TDS on Disability Pension to Army Personnel

Press Release, dated 20-12-2007

It has been reported in the press that some banks were deducting tax from pension of disabled ex-servicemen in violation of Government instructions.
RBI was requested to have the matter investigated and remedial action taken. After examination, RBI discovered that in one specific instance, due to oversight, the pensioner’s disability pension was wrongly taken into account while calculating income-tax.

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 to issue suitable instructions to all their pension disbursing branches that income-tax should not be deducted from the disability pension paid to the pensioners of the Armed Forces.

Conclusion

The disability pension given to Armed Forces Personnel are having two components-disability element & service element. Both are tax free vide Ministry of Finance notification read with clarification from CBDT and also there can not be any TDS as the amount is fully tax free

3 Types of Pension to Armed Forces Completely Tax Free!

   

Armed forces of this country –be it Army, Navy, Air Force or CRPF or BSF and others are doing great service in the most difficult circumstances. As a mark of respect to them, this blog publishes article on tax issues and completely free to read.  I have already published two of the related posts – disability pension to armed forces and Pensions received by certain awardee. However, the kind of feedback, it is considered necessary to post a consolidated post on the subject of tax free pensions to Armed Forces Personnel.

Disability Pension is Tax Free & TDS Free!

Armed Forces personnel get the disability pension, which is aggregate of two components-disability pensions and service pension. On the question of its being tax free, the first thing to note is the fact that the tax exemption on the disability pension is not provided under section 10 or anywhere in the Income Tax Act. The disability pension has been made tax-free by executive instructions of the government.

You can read on this issue on the post titled No Tax or TDS on Disability Pension to Armed Forces

Pension Received by Gallantry Award Winners or His Family

The pension received by gallantry award holder and also family pension received by the member of the family of gallantry winner’s is tax free as per section 10(18) of the Income Tax Act . , Read the provision below :

 10 (18)any income by way of—

(i)  pension received by an individual who has been in the service of the Central Government 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 notification⁷⁷ 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).

Explanation.—For the purposes of this clause, the expression “family” shall have the meaning assigned to it in the Explanation to clause (5);

 Section 10(18) l Gallantry Award Notification

No. SO 1048(E), dated 24-11-2000, as amended by Notification No. SO 81(E), dated 29-1-2001.
119. Income by way of pension received by an individual who has been in service of Central Government or State Government and has been awarded any gallantry award
In exercise of the powers conferred by sub-clause (i) of clause (18) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies the gallantry awards for the purposes of the said section, mentioned in column 2 of the table below awarded in the circumstances as mentioned in corresponding column 3 thereof.
Sl. No.	Name of gallantry award	Circumstances for eligibility
1	Ashok Chakra	When awarded for gallantry.
2	Kirti Chakra	– do –
	Shaurya Chakra	– do –
	Sarvottam Jeevan Raksha Padak	When awarded to civilians for bravery displayed by them in life saving acts.
5	Uttam Jeevan Raksha Medal	– do –
	Jeevan Raksha Padak	– do –
	President’s Police Medal for Gallantry	When awarded for acts of exceptional courage displayed by members of police forces, Central police or security forces and certified to this effect by the head of the department concerned.
8	Police Medal for Gallantry	– do –
	Sena Medal	When awarded for acts of courage or conspicuous gallantry and supported by certificate issued to this effect by relevant service headquarters.
10	Nao Sena Medal	– do –
	Vayu Sena Medal	– do –
	Fire Services Medal for Gallantry	When awarded for acts of courage or conspicuous gallantry and supported by certificate issued to this effect by the last Head of Department.
13	President’s Police and Fire Services Medal for Gallantry	– do –
	President’s Fire Services Medal for Gallantry	– do –
	President’s Home Guards and Civil Defence Medal for Gallantry	– do –
	Home Guards and Civil Defence Medal for Gallantry	– do –

                

 What is the Meaning of Family For Exemption Purpose

The meaning of family members is Explained under Section 10(5) of the Income Tax Act .

(i)             the spouse and children of the individual ; and

(ii)           (ii)the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual

  Pension for Death on Duties of Armed Forces Personnel

Family pension received by family members of armed forces including para 

military forces [Section 10(19)] 

With effect from the 1st day of April, 2005 family pension received by the widow or children or 

nominated heirs, as the case may be, of a member of the armed forces (including paramilitary forces) 

of the Union, where the death of such member has occurred in the course of operational duties, in 

such circumstances and subject to such conditions, as may be prescribed shall be fully exempted.

Section 10(19) of the Income Tax Act provides that amount of pension received by the family members of armed forces personnel including Para-,military personnel who dies in certain circumstances in course of performing his /her duties , shall be tax free . The excerpt of the provision is given below :

Condition Prescribed 

Section 10(19) speaks of exemption of family pension when the death of Armed Forces or Para-Military personnel – has occurred in the course of operational duties in certain Circumstance which is prescribed in Rule 2 BBA

 (i) acts of violence or kidnapping or attacks by terrorists or anti-social elements;

(ii) action against extremists or anti-social elements;

(iii) enemy action in international war;

(iv) action during deployment with a peace keeping mission abroad;

(v) border skirmishes;

(vi) laying or clearance of mines including enemy mines as also mine sweeping operations;

(vii) explosions of mines while laying operationally oriented mine-fields or lifting or negotiation minefields laid by the enemy or own forces in operational areas near international borders or the line of control;

(viii) in the aid of civil power in dealing with natural calamities and rescue operations;

(ix) in the aid of civil power in quelling agitation or riots or revolts by
demonstrators.

Notification  No 45/2005 dated 09 Feb 2005 given below:-

Documents Required to take Exemption by Deceased Family

As per Rule 2BBA (2), obtain a certificate  from the Head of the Department where the deceased member of the armed forces(including paramilitary forces) last served, or the service headquarters, as the case may be, that the death of such member has occurred in the course of operational duties in circumstances mentioned above 

-----------------------------------------------------------------------------------------------------------------------------------------------

Source - http://taxworry.com , PCDA (P) and Indian Army website.