Monday, February 1, 2016

INCOME TAX EXEMPTION ON DISABILITY PENSION : ARMED FORCES PERSONNEL



INSTRUCITON NO 2/2002

F. No. 200/51/99-ITA                                                            Government of India Ministry of Finance                                 Department of Revenue Central Board of Direct Taxes             New Delhi.                                                                       The 2nd July, 2002.

To,

All the Chief Commissioners of Income - tax,
All the Directors General of Income-tax, 

SUBJECT: Exemption from income tax to disability pension “disability element” and “ service element” of a disabled officer of the Indian Armed Forces – Instructions

Sir,

1.      Reference have been received in the Board regarding exemptions income tax to disability pension  i.e. “disability element” and “service element” of a disable officer of the Indian Armed Forces.

2.          It appears that field formations in certain cases are not unitary allowing disability pension in spite of Boards – Instruction No 136 dated 14th January, 1970 [F.No.34/3/68-IT(A.I)

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 Army Forces contains be exempt from income tax.
 
4.       This may be brought to the notice of all the officers working under your charge. 

Yours faithfully
                                                                                                                                                                                                          Sd/x-----
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Income Tax Exemption - IT Exemption on complete Disability pension

The entire pension, that is, service element (service pension) and disability element of disability pensioners is exempted from the purview of Income Tax. Disability Pension comprises of two elements, service element that is granted in terms of the length of service (subject to a minimum amount in cases where service rendered is less than pensionable service), and disability element which is granted in terms of the percentage of disability. There is no minimum qualifying service prescribed for service element or disability element, hence even if a person has a single day of service, he or she is entitled to disability pension. For individuals who have completed their minimum qualifying service for pension, their service pension becomes the service element for purposes of disability pension. Both elements are exempted from Income Tax and so are the arrears of both elements. The same has been clarified by the Ministry of Finance, Department of Revenue vide Instruction No 2/2001 dated 02 July 2001 and Instruction No 136 dated 14 January 1970, both of which can be viewed below.
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Instruction No 136
F.No. 34/3/68-IT(AI)
Govt of India
Central Board of Direct Taxes
New Delhi, dated the 14th Jan 1970

From :Shri S N Nautial
Secretary, CBDT

To:
All Commissioners of Income Tax

Subject : Exemption – Service and Disability Element of Disability Pension granted to a disabled officer of the Indian Army – whether exempted from Income Tax.

Sir,

1.Reference is invited to the Board’s Letter F No 42/9/59-IT(AI), dated the 5th Sept 1960 on the above subject wherein it was mentioned that in the cases falling under Item (29) of Finance Deptt. Notification No 878-F (Income Tax) dated 21-3-1922, the ‘disability element’ of the disability pension received by an officer of the Army will only be exempted from tax and that the ‘service element’ will be subjected to tax.

2. On reconsideration of the matter, in consultation with the Ministry of Law, the board are advised that item 29 of the notification does not differentiate between types of pensions. Accordingly in the cases falling under item 29 of the above notification, entire disability pension will be exempted from income-tax.

3. The above instructions may be brought to the notice of all assessing officers in your charge

Yours faithfully,

Sd/-
(S N Nautial)
Secretary CBDT
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                                                                                Instruction No 2/ 2001
F.No. 200/51/99-ITA.I
Govt of India
Ministry of Finance
Deptt of Revenue
Central Board of Direct Taxes
New Delhi, the 2nd July, 2001

To :
All Chief Commissioners of Income-Tax
All Directors General of Income-Tax


Subject : Exemption from Income Tax to disability pension, i.e., “disability element” and “service element” of a disabled officer of the Indian Armed Forces – Instructions regarding
Sir,
1.References 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-II(AI) ).

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 brought to the notice of all officers working under you.

Yours faithfully


Sd/-
(B L Sahu)
OSD (ITA-I)

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(Source Via e-mail from Col Ajit Singh Rana, Retd.

24 comments:

  1. what is service element.. is service element is service pension

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  2. Yes, Service element is service pension

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  3. Pls let us know under which section is this applicable. This will help us while filing returns.

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  4. under which section of income tax it is applicable . Where can we show the exemption ?

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    Replies
    1. Sir, did u receive the answer from any source ?

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  5. No one is able to clarify the section or column of ITR WHERE WE CAN FILL UP THIS EXEMT AMOUNT. KINDLY CLARIFY THIS.

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  6. This letter is only applicable for officers. Is there any mention of JCOs and OR who are in receipt of disability pension. May be in near future it may affect JCOs and OR consequent to 7th pay commission and OROP.

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    Replies
    1. As far as this rule goes, the word 'officer' means any person who has been in military service. The others are also Non Commissioned Officers, Junior Commissioned Officers etc.,

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  7. I think the policy has changed now. The rebate on Income Tax is applicable only when an officer is sent out of service on disability grounds. This is the new policy received by SBI pension section, Mumbai.

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    Replies
    1. HPS Sodhi. I am a disabled exs and TDS was deduected from my pen Aug 16. I request you if you have a copy new policy order of dis pen (SBI Pension Mumbai), kindly sent to my mail address. Email reshma_renjith@yahoo.co.in. ph : 9442577873 from Radhakrishnan, Pondicherry

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    2. Cdr. Nitin DeshpandeSeptember 2, 2016 at 11:58 AM

      SBI does not have any Govt of India instructions on this. This is their internal communication to deduct TDS on those who have not been boarded out. May be we will have to claim refund in IT return

      Delete
  8. Suddenly, income tax stand deducted by SBI from disability pension recd in month of august 2016. What could be the reason,? Any body in knowledge of it pl.

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  9. Suddenly, income tax stand deducted by SBI from disability pension recd in month of august 2016. What could be the reason,? Any body in knowledge of it pl.

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  10. Presently SBI has ask me for application to submit for exemption of TDS however they have neither shared any authority nor are the aware. Presently I have submitted the above 2001 instruction. waiting for the response

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  11. Presently SBI has ask me for application to submit for exemption of TDS however they have neither shared any authority nor are the aware. Presently I have submitted the above 2001 instruction. waiting for the response

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  12. This comment has been removed by the author.

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  13. This comment has been removed by the author.

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    Replies
    1. http://taxworry.com/disability-pension-to-armed-forces-fully-exempt-from-tax-tds/

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  14. http://indiantaxblog.blogspot.in/2016/05/important-changes-to-income-tax-rules.html

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  15. Sir
    Please refer to Para No. 88.1 , 88.2 and 88.3 of Defence Pension Payment Instructions 2013 issued by PCDA, Allahabad to All PDAs except Post offices. In these paras it is clarified that Diability pension (both Service element and disability element) is exempted from Income tax, Pl down load from internet and show to thh banks.

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  16. Hi Sir
    Gone through all above comments and articles, but still not able to find found, how to claim the same in ITR 1. Anyone has any clue about that.

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  17. Disability pension & Disability element both are tax exemption for officers and is there any provision for other ranks?

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  18. Is element means full pension basic + da.

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