Faced with criticism by veterans and serving soldiers over the decision to tax disability pension, the Government has decided to roll it back in the next few days. The Government now wants the Services to devise ways to stop misuse of the facility of tax exemption.
The decision to tax pension taken in June applied to all those soldiers and officers who had served their entire tenure of service. However, those officers who were invalidated due to serious injuries were exempt from tax. Moreover, the disability pension and normal pension were exempted from tax before the controversial decision.
Defence Minister Rajnath Singh had assured Parliament after the Opposition raised a din over the issue that he has asked his officials to seek clarification from the Finance Ministry regarding taxing the pension.
The June 24 order issued by the Central Board of Direct Taxes (CBDT) removing tax exemption on disability pension led to massive uproar in the armed forces fraternity. However, the Government maintained the step was taken to stop misuse of the facility in practice since 1922 by some unscrupulous elements, including senior officers.
The CBDT circular said tax exemption for disability pension will be “available 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”.
Rejecting this justification to tax disability pension, veterans and serving officers said the Government cannot punish the entire lot for the so-called misuse committed by a handful of officers and soldiers. Before the decision to tax the pension, the officers and men were entitled to it if they fitted into the bracket of 20 per cent of disability or more. Veterans also said the problem projected by the Government was exaggerated and soldiers suffering from genuine disabilities should not be clubbed with the non-genuine claimants of pension.
Admitting that the Government was actively considering taking back the controversial decision to tax the disability pension, sources said here on Monday the Defence Minister, however, directed the Army, IAF and Navy to come up with a foolproof system to plug the possibility of misuse of pension clause by senior officers.
The Government had maintained that many officers were claiming disability pension for cases like hypertension, diabetes, hearing loss and other ailments generally linked to lifestyle. Taking these reports into account, the Ministry has asked the three Services to exercise more vigilance in declaring personnel disable to avoid future problems, officials said. There are nearly 25 lakh ex-servicemen.