This quick post is on account of latest circular issued by the CBDT on the subject of tax exemption to armed force personnel who are invalidated during service . So here are major points on the issue of tax exemption of the pension received by such invalidated armed force personnel.
1. The pension received by a armed force personnel -Army, Navy or Air-Force- is fully exempt vide. (refer Finance Ministry notification No 878-F (Income Tax) dated 21-3-1922 ).
2. The disability pension is tax free for all ranks of armed forces- In other words, for the purpose of tax exemption, there is no difference between a disabled officer and a disabled soldier.
3. The disability pension is tax exempt only if armed force personnel was disabled or invalided during service and not after retirement.
For point 2 & 3 refer latest cbdt circular 13/2019 dt 24th June 2019.
4. The aggregate disability pension i.e disability element and service element- is tax free. Refer CBDT instruction F. No. 200/51/00-ITA-1 dt. 02.7.2001
5. No TDS is required on the said disability pension paid to Armed Forces personnel. Refer the Press Release, Dated 20-12-2007 by RBI .
Please read the earlier article No TDS on Disability Pension to Armed Forces Personnel