MEETING OF NODAL OFFICERS - IMPLEMENTATION OF 7TH CPC

ONE RANK ONE PENSION DILUTED VERSION

EXAEMPTION OF INCOME TAX - DISABILITY PENSION

[F. No. 200/51/00-ITA-1 dt. 02.7.2001 from Ministry of Finance Deptt. Of Revenue Central Board of Direct Taxes, New Delhi.]

Subject:   Exemption from income tax to disability pension, i.e. ” disability element” and “service element” of  disabled officer of the Indian Armed Forces- Instructions regarding.

Reference have been received in the Board regarding exemption from income tax to disability pension, i.e. “disability element” and “service element” of a disabled officer of the Indian Armed Forces.

2. It appears that field formations in certain cases are not uniformly allowing disability, pension in spite of Board’s Instruction No.136 dated 14th January, 1970 (F.No.34/3/68-IT(A.1)).

3. The matter has been re-examined in the Board and it has been decided to reiterate that the entire disability pension, i.e. ” disability element” and “service element” of a disabled officer of the Indian Armed Forces continues to be exempt from income tax.

4. This may be bought to the notice of all the officers working under you.

Sd/-

B.L. Sahu

Officer on Special Duty (ITA .1)

Press Release, dated 20-12-2007

It has been reported in the press that some banks were deducting tax from pension of disabled exservicemen 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.

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*  (Officer in the sense all defence personnel)