A decision to levy tax on the disability pension for defence personnel was backed by the armed forces headquarters, Union Finance Minister Nirmala Sitharaman informed the Lok Sabha.
"Ministry of defence or the ministry of finance have not taken a call on their own. It was on the recommendations of the armed forces headquarters. It is not a decision taken without consulting the armed forces," Sitharaman said while replying on the finance bill discussion in Lok Sabha on Thursday.
Sitharaman's remarks came days after her cabinet colleague and Defence Minister Rajnath Singh gave an assurance that the government was rethinking its notification about doing away with tax benefits to veterans.
On June 8, Singh told the Rajya Sabha that “No soldier with a disability will be inconvenienced”. “A clarification has been sought from the Central Board of Direct Taxes (CBDT) and the issue is being re-examined by the ministry,” Singh said, while answering a question raised in the Upper House.
On Thursday, Nirmala Sitharaman gave clarification on the issue while maintaining that it was not part of the finance bill.
In a notification dated June 24, the Central Board of Direct Taxes (CBDT), under the union finance ministry, said it decided to tax the disability pension. It created a furor in the military fraternity.
According to the CBDT order, “such tax exemption 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.” It means, if an officer or a jawan leaves the force due to his disability, his pension benefits will not be taxed. And the order applies only to those who continue to serve with disability.
After the issue was raised in the Parliament by Adhir Ranjan Chowdhary of Congress, Rajnath Singh, who has a 'pro-soldier' image, had responded by saying he will look into the matter as interest of the soldiers is one of the top priorities of the government.
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But before Rajnath Singh could do something, his predecessor Sitharaman fired a salvo and defended her ministry's decision by placing the onus for the initiative on the armed forces itself. She put out an internal unsigned note on Twitter, which stated the “Response of the Armed Forces on the issue of taxability of disability pension states that the disability pension attributable to service conditions was being exploited.”
“This aspect is being exploited by those unscrupulous personnel, who have gained from disability benefits provided by the government to disabled soldiers,” the note said.
And to make the matter worse, Army headquarters officially came out to back the decision to tax disability benefits. In a series of tweets, the Army criticised "personnel seeking disability, even for lifestyle diseases" for tax-exemption purposes and said it highlighted a worrying trend in the face of “security challenges to the nation”.
“Over the years, broad-banding and compensation awarded for disability with income tax exemption have led to a rise in personnel seeking disability, even for lifestyle diseases. The trend is worrisome and that too when the security challenges to the nation are on the rise," the Army's additional director general of public information (ADGPI) said in a tweet.
Incidentally, the Army commemorated 2018 as the ‘Year of the Disabled in the Line of Duty’, which include both war disabled and other disabled personnel.