Taxing of Disability Pension

The Army personnel can develop a disability while in service through an injury or disease. Based on the degree of disablement, he/she can be either retained in service or can be invalided out of service.

When the disability is 20 per cent or more then the army personnel is entitled to disability pension. Disability pension is given for the following reasons:

• For disability attributable to or aggravated only by the service.
• When the disability percentage as per the medical board is 20% or more.

Disability pension is decided based on the two components i.e. Service element and Disability element.

Disability Pension Tax

• The central government has taken the decision to tax the disability pension. The Finance Ministry has stated that the order was based on the recommendation of Army headquarters.
• The new proposal will provide tax exemption only to armed forces personnel who have been invalidated from service on account of bodily disability attributable to or aggravated by such service and not to personnel who have been retired on superannuation or otherwise

Observation made by Army Headquarters

• Some unscrupulous personnel have found leverage in the existing system for seeking financial gains through their disabilities.
• The army is concerned about personnel who are boarded out because of disability and need additional financial support. The broad-banding and higher compensation awarded for disability with tax exemption have over the years led to rise in personnel seeking disability, even for lifestyle diseases.
• Hence those who have found the leverages in the existing system for seeking financial gains through their disabilities need to be scrutinized and taken to task.
• Army provides necessary supports along with remuneration to those who have incurred the disabilities. But the unscrupulous personnel are exploiting the disability benefits provided to disabled soldiers. It is necessary to check it at early stages as the Army cannot have a large number of personnel with medical disabilities in the rank and file when the security challenge to the nation is on the rise.

Army personnel are arguing that if there is a misuse of certain provision, the Army must take suitable action to prevent that, including disciplinary action against those faking disability instead of punishing everyone by taxing the disability pension.