Disability Pension

The government recently withdrew a circular that directed banks to deduct income tax from disability benefits and pensions given to military personnel following public protest.

Categorisation of Disability

Disabled veterans are classified under 3 categories:

  • Battle Casualties (War Wounded): personnel injured during operations against enemies, terrorists, insurgents, etc.
  • Battle Casualties: personnel declared as battle casualties but have not suffered injuries due to physical wounds.
  • Disabilities due to Service Conditions: personnel disabled due to condition of service.

Basis of Benefits

The benefits given to the disabled veterans are based on the percentage of disability.

  • <20% disability: not entitled to any benefits
  • 21% to 50%: categorised as 50% disabled
  • 51% to 75%: categorised as 75% disabled
  • >76% disability: categorised as 100% disabled

The disability pension amount is based on 2 categories:

  • I rate: for battle casualties (war wounded) and battle casualties.
  • II rate: for disabilities due to service conditions.

Taxation of Disability Pension

Disability pension is not subject to income tax deduction. However, in June 2019, the Central Board of Direct Taxes (CBDT), notified that the income tax exemption for disability pensions is applicable only if the personnel had been invalidated from service, but not to retirees. The Supreme Court had called for maintaining a status quo on the issue.

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