Income Tax on Disability Pension for those superannuating with Disabilities
Where and How it started
Note: Presently matter is sub-judice in Writ Petition (Civil) No. 953 of 2019 in the honourable Supreme Court
Background: On receiving information regarding issue of Circular No. 13 of 2019 by the Central Board of Direct Taxes (CBODT) the undersigned filed a RTI application (CBODT/R/2019/51306 on 5th July 2019 requesting for information including file notings that preceded the issue of ibid Circular.
When neither a denial of information or nor furnishing of information occurred, a First Appeal No. CBODT/A/2019/60093 was filed on 4th October 2019.
Finally, a Second Appeal No. CIC/CBODT/A/2019/151305 dated 25th October 2019 was filed. It was decided by the honourable Central Information Commission on 24th June 2021 and CPIO, CBODT was ordered to provide the information.
In this Post
Reproduced below is a Typed True Copy of the reply F No. 173/317/2019-ITA-I dated 12th August 2021 and received by Speed Post on 16th August 2021 with one change – the file noting have been typed in a chronological order, commencing with MoD (Finance Pension) quoting a CGDA UP No. 5606/AT-P/Vol XX dated 30th September 2015 and ending with the CBDT Circular 13 of 2019 being approved by Chairman CBDT on 26th June 2019.
Murder of the English language by the person signing the note is indicated by (sic).
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F No. 173/317/2019-ITA-I
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(ITA-I Division)
Room No. 245-A, North Block
New Delhi – the 12th August 2021
To
---------
Sir,
Sub: - Application seeking information under Section 6(1) of the RTI Act, 2005 – regarding
Kindly refer to your RTI application dated 05.07.2019 and the CIC’s Order No. CIC/CBODT/A/2019/151305 dated 24.06.2021.
2. With respect to the information sought in your RTI Application and as directed by the Hon’ble Information Commissioner in the order mentioned above, please find enclosed herewith -
(i) Copy of notings (page 1 and 2) of File No. 173/250/2019-ITA-I
(ii) Copy of DO from Ministry of Defence dated 31.07.2017 along with the enclosed Ministry’s notes
(iii) Copy of reminder dated 21.09.2019 to the DO mentioned in (ii).
Yours faithfully,
Sd/------------------
(Sourabh Jain)
Under Secretary (ITA-I)
Email: usita1-cbdt@gov.in
Copy to:
Shri S C Sharma, Deputy Registrar
Central Information Commission
Page 71
F No. 25(06)/2015/FIN/PEN
-01-
Ministry of Defence
Finance (Pension)
Sub: Exemption of disability pension from Income Tax.
CGDA vide their UO letter No. 5606/AT-P/Vol. XX dated 30th September 2015 (Flag Z) has raised a doubt, whether the Income Tax exemption would be limited to only such disabled Armed Forces Personnel who are invalided out of service due to disability attributable to or aggravated by military service conditions or to even those who retire after full service with some disability. They have requested to confirm grant of IT exemptions to specific category of disabled/discharged with disability in consultation with IT Dept.
2. CGDA has stated that the Armed Forces personnel are entitled to disability pension/element as per following orders
(A) Regulation 81 read with Regulation 94 (Flag P) for commissioned officers and Regulation 81 read with Regulation 98 for JCOs/ORs of Pension Regulations for the Army Part I (2008) provides that Service Personnel who are invalided from service on account of a disability which is attributable to or aggravated by military service may be granted a disability pension consisting of service element and disability element.
(B) Regulation 37 (Flag Q) for Commissioned Officers and Regulation 53 (Flag R) for JCOs/ORs of ibid pension regulation prescribes that an officer of JCO/OR who retired/released/discharged on attaining the prescribed age of retirement or on completion of tenure/service limit, if found suffering from a disability attributable to or aggravated by military service and so recorded by Release Medical Board, may be granted disability element in addition to the retiring/service pension or retiring/service gratuity, from the date of retirement/discharge if the degree of disability is accepted at 20% or more.
3. Ministry of Finance, Department of Revenue, Central Board of Direct Taxes letter No. 200/51/99.ITA-1 dated 6th May 2000 (Flag X) and dated 2nd July 2001 (Flag Y) provided for exemption of entire disability. Due to lack of clarity on the subject, both categories of disability pension as described above appear to be claiming the benefit of IT exemption which may not be the spirit behind the IT exemption. The existing PPOs which are issued to notify disability pension do not provide any distinction to identify Armed Forces Personnel going out with disability pension on invalidment or at the time of discharge.
4. In the past couple of years, there has been an upward trend in the grant of disability pension to Armed Forces personnel who retire on superannuation or after completion of terms of service.
5. It is a fact that the grant of disability element due to the recommendations of Release Medical Boards and through appeal process are distressingly high. To make the matters worse Armed Forces Tribunals promulgates orders for grant of disability pension/element without giving scant respect (sic) to the Govt policy in thousands of cases. It may kindly be noted that an Army officer in the rank of Lt General is one of the members of the AFT. This Division and IFAs positioned in the Service HQs daily gives financial concurrence in a number of cases for grant of disability pension/element. Further, appeals filed by MoD against AFT orders in the case of Premature Retirement /Superannuation cases are under consideration of Apex Court. But the chances of getting a favourable order in such appeals are very bleak due to the fact that almost all the appeals are being filed by Service HQs after elapse of many years from the AFT order, it automatically attracts the dismissal of the appeal by Apex Court due to limitation of Time. Services being the beneficiaries of the cases, interest they have in drafting the appeal properly or defending the case is explicable. In other words, in the near future many other personnel like premature retirements/superannuation with disability would also come under the category of disability pension bracket and have policy support.
6. At present many service officers/PBOR with life style diseases like Primary Hypertension, Diabetes Mellitus, back ache and old age diseases like cataract, deafness etc are drawing disability pension/element.
7. In view of the above, we may refer the file to Department of Expenditure, Ministry of Finance to clarify the point raised by CGDA vide their UO letter dated 30th September 2015.
Sd/-----------------
8/10/2015
Sd/------------
9/10/15
SO (P)
AFA (P) Sd/---------------9/10/15
DFA (P) Sd/-------------9/10/15
Addl FA & JS (DR) Sd/-----12/10
May kindly approve the proposal above for taking up the matter with MoF (DOE). Sd/--------- 13/10
FA (DS) This issue lies with the Dept of Revenue (CBDT to be exact) and we may send to them. A copy of the same may be sent to DOE as well.
Sd/---------- 14.X.15
(Sushanshu Mohanty)
FA (DS)
Addl FA (DR) Sd/------15/10
DFA (P) 19/X
CBDT, Department of Revenue, MoF, New Delhi
MoD(Fin/Pen) No. 25 (06)/2015/Fin/Pen dated 19/10/2015
From Shri Ravi Kant, JS (ESW)
D.O. No. 1(7)/2010/D(P/P) Dated 31st July 2017
Dear Shri RashmiRanjan Das Ji,
Please refer to this Ministry’s ID Notes of even No. dated 28.06.2015 and 25.04.2017 regarding exemptionof disability pension in respect of Junior Commissioned Officers/Other Ranks (JCOs/ORs) or Personnel Below Officer Ranks (PBoRs) of Armed Forces.
2. As per CBDT letter No. 200/51/99-ITA-1 dated 02.07.2001 disability pension payable to disables officers of Armed Forces are exempt from Income Tax. However, it has come to notice that some Pension Disbursing Agencies (PDAs) (Banks) are deducting tax on disability pension of JCOs/ORs of Defence Forces on the pretext that CBDT letter dated 02.07.2001 is applicable only for officers of Armed Forces as there is no mention of JCO/ORs or PBoRs in the aforesaid letter.
3. It is pertinent to mention here that JCOs/ORs or PBORs are part of Armed Forces and work in the same conditions as officers of Armed Forces do.
4. I shall be grateful if you could kindly look into the matter personally and arrange to issue necessary clarification in this regard at an early date.
With regards
Yours sincerely,
Sd/---------------
(Ravi Kant)
Shri Rashmi Ranjan Das, Joint Secretary (TPL-1)
Ministry of Finance, Department of Revenue
147 B-1, North Block New Delhi
Ministry of Defence
Department of Ex-Servicemen Welfare
D (Pension/Policy)
Subject: Clarification regarding exemption of disability pension in respect of Junior Commissioned Officers/Other Ranks (JCOs/ORs) or Personnel Below Officer Rank (PBORs) of Armed Forces -reg
Please refer to this Ministry’s DO letter No. 1(7)/2010-D (P/P) dated 31.07.2017 from Joint Secretary (ESW) addressed to Joint Secretary (TPL-1) on the subject mentioned above which was transferred to CIT (ITA) vide OM No. 370149/150/2017-TPL dated 09.08.2017 for necessary action in this regard, this Ministry’s reminder of even number dated 10.10.2017 and 21.12.2017 may also refer. However, requisite clarification/comments is still awaited.
2. It is again requested to expedite the matter and issue necessary clarification in the matter at the earliest.
Sd/----------------------
(Manoj Sinha)
Deputy Secretary to the Govt of India
CIT(ITA), CBDT, North Block, New Delhi
MoD ID No. 7(1)/2010/D (Pen/Pol) dated 21.01.2019
F No. 173/250/2019-ITA-I
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Subject: Exemption of service element and disability element of disability pension granted to disabled personnel of armed forces who have been invalided on account of disability attributable to or aggravated by such service - reg
Matter under consideration in this file is OM/Note received from Ministry of Defence, requesting to clarify: -
(i) whether exemption is applicable only to the disabled officers of Armed Forces or all disabled Armed Forces Personnel (i.e. including officers and Jawans)
(ii) whether the Income Tax exemption would be limited to only such disables Armed Forces Personnel who are invalided out of service due to disability attributable to or aggravated by military service condition or even those who retires after full service with some disability.
2. Under the existing provisions of clause (l) of sub-section 2 of section 297 of the Income Tax Act 1961 (‘Act’) any notification issued under sub-section (l) of section 60 or section 60A of the Indian Income Tax Act, 1922 (now repealed) and in force immediately before the commencement of the Act shall continue to be in force to the extent to which no provisions has been made under the Act. Previously, in exercise of powers conferred under section 60 of the Income Tax Act 1922, vide Notification No. 878-F dated 21.03.1922, it was ordered at para 19 that pensions granted to members of His Majesty’s naval. Military or air forces who have been invalided for naval, military or air force service on account of bodily disability attributable to or aggravated by such service would be exempt from tac under the Indian Income Tax Act, 1922.
3. The matter has been subsequently further clarified vide instruction No. 136/1970 dated 14.01.1970 in F No. 34/3/68-IT (AI) and instruction No. 2/2001 dated 02.07.2001 in F No. 200/51/99-ITA-I. It was stated that the entire disability pension , i.e. “disability element” and “service element” of a disabled officer pf the Indian Armed forces continue to be exempt from income tax under the Income Tax Act, 1961,
4. The notification No. 878-F dated 21.03.1922 provides income tax exemption to all members of Armed Forces who have been invalided for naval, military or air force service on account of bodily disability attributable to or aggravated by such service. Thus, income tax exemption under the above clause should be available to all armed forces personnel (irrespective of rank) who have been invalided for such service on account of bodily disability attributable to or aggravated by such service.
5. Further, such tax exemption is available only to armed forces personnel who have been invalided from service on account of bodily disability attributable to or aggravated by such service. Thus personnel who have been retired on superannuation or otherwise but not invalided from service on account of bodily disability attributable to or aggravated by such service should not get benefit of this exemption.
6. If approved, the above position of law may be clarified by way of circular. The proposed circular as DFA is placed below for kind perusal, consideration and approval please.
Sd/-----------------
Vinay Sheel Gautam
JCIT-OSD (ITA-I)
Dated: 24.06.2019
OSD (ITA-I) Sd/-----24/6/19
CIT (ITA) Sd/-------24/6/19
Member (IT & C) Approval of Member taken over phone. Sd/---------- 24/6/19
Chairman Sd/---------------- 24/6/19
M (IT &C)
CIT (ITA) Sd/--------- 24/6/19
OSD (ITA) Sd/---------- 24/6/19
US (ITA-I) Sd/------ 24/6/19
US (ITA-II) Circular signed Sd/------ 24/6/19
JCIT (OSD) (ITA-I)
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