Revision of Pension Pre 2006 retirees- De linking of revised pension from Q. Service of 33 Years

Dear Veterans,

1.         The contents of any letter of Govt of India are so cryptic that it becomes difficult for all to understand what do they mean. So is the Ministry of Personnel, Pensions and Public Grievances letter dated 06 Apr 2016. To understand this letter, you have to read and read like I did five to six times. What did the letter say? It simply says All Central Government pensioners will get pension equal to 50% of sum of (Minimum pay in pay band + Grade pay + MSP (for Defence Pensioners) even if they did not put in 33 years’ service. Please understand this letter is addressed to Central Govt Civilian employees. The letter will apply mutatis mutandis to Defence Pensioners too.

2.         Now like a good fauji understand its relevance to us. I always feel to understand any complex problem let us take an example which even a Sepoy can understand. Then we go to Officers. Let me be bit verbose and give a bit of history of this famous 33 year rule.

History of 33 Year Rule

3.         Faujis had separate military pay commissions till 1976. The Govt of India gave a gift to faujis by combining Civil and Military Central Pay Commissions and called it 3^rd Central Pay Commission (CPC). 3^rd CPC saw the average entry of civilians into Central Govt service was 25 and age of retirement in 1970s was 58 years. So any Central Govt civilian can serve for maximum of 58 – 25 = 33 years.

4.         Full Pension. 3^rd CPC introduced the term Full Pension only if one serves for a period of 33 years. Otherwise pension will be reduced on pro-rata basis for lesser service. They were very kind to give faujis Rank Weigtage as we do not serve for 33 years. So rank weightage was introduced for faujis. The rank weightage is dependent upon one’s rank at the time of retirement. The same is given here:-

            (a)        Sepoy            -           10 years (enhanced to 12 years w.e.f. 24 Sep 2012)

            (b)       Naik                -           8 year (enhanced to 10 years w.e.f. 24 Sep 2012)

            (c)      Havildar          -           6 years (enhanced to 8 year w.e.f. 24 Sep 2012)

            (d)       JCOs               -           5 years.

            (e)        Lt and Capt     -           9 years

            (f)        Maj                  -           8 years

            (g)       Lt Col (TS)     -           5 years

            (h)       Lt Col (SG )    -           7 years

                        & Col

            (j)        Brig                 -           5 years

            (k)       Gen Offrs        -           3 years

5.         How are the pensions of all pre – 2006 faujis was calculated?

6.         Sepoys. Sepoys were permitted to serve only for 15 years and with rank weightage of 10 years his pensionable or qualifying service comes to 25 years. Since he did not complete 33 years his pension is reduced on pro –rata basis to = Full pension x (15+10)/33. Pension is as per Hon’ble Supreme Court judgment is 50% of sum of Minimum pay in pay band, Grade pay and Military Service Pay. Minimum pay in pay band is given in SAI 1/S/2008 for JCOs and OR and SAI 2/S/2008 for Officers. Full Pension of Sepoy with rank weightage as explained above comes to = 0.50 x ( minimum pay in pay band of Rs 6250 + grade pay of Rs 2000 + MSP of Rs 2000) = Rs 5125 pm + DR. Sepoy gets this pension if he serves for 33 years. That is why Circular 547 says pension of Sepoy with 15 years’ service in Group Y is = Rs 5125 x (15+10)/33 = Rs 3883.

7.         Single lady of this Sepoy gets 60% or Rs 3500 whichever is higher. So she gets pension of Rs 3500 pm + DR.

8.         Is this just? Answer is NO. Why?

9.         Courts of law go by their own previous judgments. Hon’ble Supreme Court in the famous Maj Gen SPS Vains Vs UOI, 2008 gave a land mark judgment which said ANY BENEFIT GIVEN TO PRESENT PENSIONERS HAVE TO BE GIVEN TO PAST PENSIONERS. OTHERWISE YOU ARE VIOLATING ART 14 OF CONSTITUION i.e. EQUALITY.

10.       You do not have to be MML and PhD to understand this simple ruling which is LAW OF THE LAND. Every one understands it (including my 5 year old grand daughter Pari) except officials of Govt of India.

11.       6^th CPC in their wisdom removed rule of 33 years. JCO/OR have to serve for 15 years to get pension of and Officers 20 years to get Pension. No 33 year rule and pro-rata reduction is permissible. Full pension which is 50% of your Last Pay Drawn. So even if you are a PMR case and if you put in minimum pensionable service you will get Full Pension.

12.       Shri MO Inasu, an Ex-Serviceman re-employed in Central Govt as Deputy Office Superintendent challenged this rule of 33 years for all pre – 2006 pensioners. CAT Ernakulam did not agree to his plea. He went to High Court of Kerala who found fault with judgment of CAT and asked them to review. Once bitten and twice shy CAT agreed to plea of Shri MO Inasu as per judgment of Hon’ble Supreme Court rule of 33 years which is not applicable to post – 2006 retirees then the same should not be applied to pre – 2006 retirees.

13.       This judgment of CAT Ernakulam had far reaching consequences to all PMR cases who were given reduced pension. Especially Sepoys to Havildars, PMR Officers & JCOs and most negligent segment of faujis i.e. Family Pensioners. Govt of India as expected appealed for review of this judgment and the same was dismissed by all courts including Hon’ble Supreme Court in 2015. Min of PPP&G recommended to the cabinet to implement judgment of the apex court to all i.e. Universal application.

14.       What is the Effect of Min of PPP & G letter dt 06 Apr 2016 on Faujis?

15.       I am extremely happy to tell you sir again with an example, the benefit of this judgment of Hon’ble Supreme Court. As is my wont, first is JCOs, OR and Family pensioners. Table is the best to understand.

Rank	Full Pension as per SAI 1/S/2008	Pro-Rata Reduced pension as per Circular 547	Loss per Month	Arrears
Sepoy Group – Y with 15 years	Rs 5125	Rs 3883	Rs 1242	From Jan 2006 to 30 Jun 2009 = Rs 68,248; From Jul 2009 to 23 Sep 2012 = Rs 39751; From 24 Sep 2012 to 30 Jun 2014 = Rs 7079 Total Arrears = Rs 1,15,077 Single Lady or Family Pensioner of Sepoy = Rs 0.6 x 115077 = Rs 69,046
Naik of Group Y with 15 years’ service	Rs 5520	Rs 3883	Rs 1637	Rs 1,38,321
Hav of Group Y with 15 years’ service	Rs 5820	Rs 3883	Rs 1937	Rs 1,77,000

16.       Since you are good in Arithmetic please calculate how much arrears Officers from Lt to Brig who put in less than 33 years service (PMR Cases) and who do not get full pension will  now get thanks to this Govt of India letter dated 06 Apr 2016. As you know one line letter will be issued by Ministry of Def which might read “Contents of Ministry of PPP &G letter dated 06 Apr 2016 will apply mutatis mutandis to Defence Services personnel”.

17.       What will Happen Now?

18.       History will be repeated. PCDA (Pensions) Allahabad will not wake up (should have woken up when they knew Min of PPP &G has recommended universal application of judgment of Hon’ble Supreme Court in 2015 and should have prepared tables of arrears of Full Pension) will take six months to issue letter to all PDAs to calculate arrears and pay them to affected personnel i.e. those who do not get full pension. Every bank will understand the letter of Govt of India, Min of PPP & G in their own way and will make their own software for arriving at arrears. Pensioners of same rank, same length of service and same group will be paid different arrears in the same village, town, city and metro by different banks like they did for 6^th CPC arrears from Jan 2006 to Jun 2009 for JCOs, OR & Family Pensioners and from Jan 2006 to 23 Sep 2012 for Officers and Single ladies. All those beneficiaries can expect some incorrect arrears only in year of Lord 2017.

19.       I hope you have no doubts on the implications of the letter of Min of PPP & G dated  06 Apr 2016 which I consider a very close to my heart as it will benefit Sepoys to Hav, PMR JCOs and OR a lot.

20.       To make things simple for all those officers who think 2 + 4 is Mathematics you are not eligible  for any arrears, if your qualifying service is shown below and are getting Full Pension:-

Rank	Qualifying Service including OR Service if any	Already Drawing Full Pension (in Rs)
Lt	24 years or more	13500
Capt	24 years or more	15350
Maj	25 years or more	18205
Lt Col (TS)	28 years or more	26265
Lt Col (SG)	26 Years or more	27795
Brig	28 years or more	29145
Maj Gen	30 years or more	30350

21.       Tell me Col Balan Sir, with this long explanation “Are you Eligible for Arrears because of this letter Min of PPP & G letter? If yes tell me the reasons and if not also give me your reasons. Even after knowing the correct answer you pretend like an Inf Offr that you do not know your head will break into thousand pieces like Betal tells Vikramaditya in monthly magazine Chandamama”.

Regards,

Brig CS Vidyasagar (Rtd)

9493191380

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 

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

   

Prime Minister approved implementation of One Rank One Pension

Prime Minister approved implementation of One Rank One Pension

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its ex-post facto approval for implementation of One Rank One Pension (OROP). The details are as follows:

1. The benefit will be given with effect from 1st July, 2014.

2. Pension will be re-fixed for pre 1.7.2014 pensioners retiring in the same rank and with the same length of service as the average of minimum and maximum pension drawn by the retirees in the year 2013. Those drawing pensions above the average will be protected.

3. The benefit would also be extended to family pensioners including war widows and disabled pensioners.

4. Personnel who opt to get discharged henceforth on their own request under Rule 13(3) 1(i)(b), 13(3) 1(iv) or Rule 16B of the Army Rule. 1954 or equivalent Navy or Air Force Rules will not be entitled to the benefits of OROP. It will be effective prospectively.

5. Arrears will be paid in four half-yearly instalments. However, all the family pensioners including those in receipt of Special/Liberalized family pension and Gallantry award winners shall be paid arrears in one instalment.

6. In future, the pension would be re-fixed every 5 year.

7. Constitution of Judicial Committee headed by Justice L. Narasimha Reddy, Retd. Chief Justice of Patna High Court on 14.12.2015 which will give its report in six months on the references made by the Government of India.

The implementation of OROP will result in enhanced pension for the pensioners/family pensioners of Defence Forces. The setting up of the Judicial Committee headed by Justice L. Narasimha Reddy will help in the removal of anomalies that may arise in the implementation of OROP order dated 7.11.2015.

Financial implications on account of grant of OROP including Pre-Matured Retirees (PMR) cases would be Rs. 10925.11 crore for payment of arrears and annual financial implication would be Rs. 7488.7 crore. Till 31st March, 2016, 15.91 lakh pensioners have been given the first instalment of OROP, which amounts to Rs. 2,861 crore. Information is being gathered for processing on priority basis, the cases of 1.15 lakh pensioners after filling in the gaps of information such as the length of service being assessed, etc.