Exemption on disability pension

Armed forces personnel up in arms over tax on disability pension

Print edition : August 16, 2019

War-disabled retired army personnel ahead of participating in Mumbai Marathon 2018 outside Sainik Institute in Colaba on January 20, 2018. Photo: Emmanual Yogini

Finance Minister Nirmala Sitharaman. She said in Parliament that the decision was taken in consultation with the Army headquarters, which had pointed out exploitation of the concession by unscrupulous elements. Photo: Kamal Narang

Defence Minister Rajnath Singh at Drass on July 20. He said his ministry would ensure that no genuine soldier drawing disability pension was inconvenienced and that he would “look into the matter and review the CBDT order”. But the order has not yet been withdrawn. Photo: NISSAR AHMAD

The government’s decision to tax disability pension of armed forces personnel who remained in service until retirement has invited strong protests.

The Bharatiya Janata Party (BJP) led by Narendra Modi returned to power riding on the slogans of national security and nationalism. It piggybacked itself on the soldier like never before and its entire campaign narrative was built on the Pulwama terror attack, the Balakot air strikes and the “tukde, tukde” gang, which it pejoratively used for all opposition parties. BJP leaders, especially the Modi-Amit Shah duo, used to their advantage the saga of Wing Commander Abhinadan, who was held in captivity for two days in Pakistan. But now it seems that all this love for the soldier was nothing but a jumla like a lot else during the Modi 1 regime.

On June 24, the Central Board of Direct Taxes (CBDT) issued a notification declaring that income tax exemptions on disability pension for veterans would no longer be available to those who continued to serve the full term of their office despite their disability. The CBDT notification states that “tax exemption will be available only to personnel who have been invalidated from service on account of bodily disability attributable or aggravated by service and not to personnel who have been retired on superannuation or otherwise”. In other words, it will be available only to those who have been forced out of service because of their disability. The CBDT notification, issued by its Chairman P.C. Mody, says the tax concession that was introduced by the British in 1922 was being withdrawn as it was being misused. The announcement upset a section of the military fraternity, and the issue went viral on social media, which finally reached Parliament where it was raised by Congress leader Adhir Ranjan Chaudhary. Replying to the charges, Defence Minister Rajnath Singh, obviously left out of the loop by the Finance Ministry, said his Ministry would ensure that no genuine soldier drawing disability pension was inconvenienced and that he would “look into the matter and review the CBDT order”.

In two voices

But before he could initiate any action, Finance Minister Nirmala Sitharaman said in Parliament that the decision was taken in consultation with the Army headquarters which had pointed out exploitation of the concession by unscrupulous elements. “It is not as if the Finance Ministry and the CBDT acted on their own. The initial demand had been raised by the Army headquarters,” she said while replying to a debate on the Budget in the Lok Sabha. “The 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,” she said.

She put out an unsigned, internal note, purportedly from the Army headquarters, on her Twitter handle to justify her stand. The note, titled “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,” it says.

The Army headquarters, too, 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 said in a tweet.

The Finance Minister’s spirited rebuff, along with the Army headquarters’ note and tweet, has so far not been challenged by the Defence Minister. The notification has not been withdrawn either.

Anger and dismay

Many senior retired defence personnel expressed dismay at the fact that the government had acted in a Shylock-like manner. “Even if the system was being misused or exploited by some influential senior Army officers, the government should have focussed on plugging the loopholes. Just because some unscrupulous elements are exploiting the system, should all those who have sacrificed for the country be deprived of their just dues?” asked an indignant Major General (retd) Satbir Singh, who is battling for One Rank, One Pension (OROP), a demand which, he says, the government has not yet conceded.

Satbir Singh asks whether military heroes like Lt General (retd) Vijay Oberoi and Major General (retd) Ian Cardozo, who were disabled in war but continued to serve with distinction until their retirement, would now forfeit their tax exemption on their disability pension. Stories of these veterans are part of military folklore. Lt Gen Oberoi lost a leg in the 1965 India-Pakistan war but went on to serve full term with distinction and rose to become the Vice Chief of the Army Staff.

Maj. Gen. Ian Cardozo’s story is also legendary. A 5 Gorkha Rifles officer, he amputated his own leg after he was hit by a landmine blast during the 1971 India-Pakistan war. After the war, he completed his full term in service, commanding a regiment and then a brigade along the way. If the government order is implemented, he and many like him will have to forfeit the tax-free status of their disability pension. “This is something that raises serious doubts about the government’s commitment towards armed forces personnel,” said Colonel (retd) Anil Kaul, who, despite losing an eye and three fingers in a military operation, completed his service tenure. He is not sure whether he will have to pay income tax on his disability pension now.

Surprisingly, the BJP government, which claims to be more sympathetic towards the armed forces than any government before it, has been working on cutting the veterans’ compensation since it came to power. The issue of disability pension figured high on the government’s agenda in December 2014 itself after the then Director General Medical Services (DGMS), Lt Gen B.K. Chopra, wrote to the Defence Secretary highlighting how senior military officers manipulated the system to earn disability pension after retirement.

In fact, the case of a senior officer of the lieutenant general rank, who got himself declared medically unfit so that he could earn disability pension as he thought he would not be elevated to the rank of army commander, is an open secret in the Army. But when, much to his surprise, he became the commander, he got himself declared medically fit again.

As Defence Minister, Manohar Parrikar had formed a committee to look into cases relating to disability pension pending in the Supreme Court soon after he assumed office. The committee recommended that all such cases be withdrawn. Not much headway was made then. Incumbent Defence Minister Rajnath Singh, replying to a question on the issue in the Rajya Sabha on July 8, said that until February 2, 2019, only 60 civil appeals had been withdrawn from the Supreme Court, of which merely 17 were against disability pension granted by the Armed Forces Tribunal. He also said that 26 cases of disability pension were pending in the Supreme Court.

It was during Parrikar’s time as Defence Minister that grading of disability was introduced to account for deciding the quantum of disability pension. At that time also the veterans had voiced their resentment, but no one paid heed. Senior army officers admit that cases for disability pension have shot up since 2006, when the pay and perks of armed forces personnel were substantially increased thanks to the Sixth Pay Commission. “But if there has been any misuse of the system, it is the government’s responsibility to plug the loopholes. How can it simply club everyone with unscrupulous elements and deny them their rightful dues?” asked Satbir Singh, calling the move a betrayal of soldiers’ trust.

“When a soldier goes into the battlefield, he goes with the belief that if something happens to him he and his family will be taken care of. If that belief is missing, how do you expect anyone to go out and brave the bullets?” asked one of the veterans who said this move was meant to break the morale of armed forces personnel.

Senior army officers point out that no other country in the world grudges its soldiers a few benefits. “Compared with countries like the United States, the United Kingdom, France and Germany, we get a pittance after retirement, and even that is being taken away,” said a senior officer due to retire in a year’s time. Objecting to the government’s contention that “lifestyle diseases” cannot be qualified for disability pension, a senior officer said certain areas of operation, like the high-altitude Siachen glacier or insurgency-ridden areas in Jammu and Kashmir and the north-eastern region, induce what are called lifestyle diseases like hypertension and stress.

“Why deny us the monetary benefits if we have acquired these diseases as a result of our work environment?” he asked.

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