INCOME TAX EXEMPTION OF DISABILITY PENSION : DISABILITY AND SERVICE ELEMENT

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 i*t 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 Forcescontinues 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