TDS on Disability Pension – A Case for Indian Armed Forces Personnel

As India celebrates 75 years of independence, it is important to highlight some benefits made available to Indian Armed Forces personnel by the Central Board of Direct Taxes (CBDT). One of these benefits falls under Section 119(2)(b) of the Income Tax Act.

The Income Tax Act provides any taxpayer under Section 119(2)(b) with the ability to claim a TDS refund, exemption, deduction or other tax relief under the income tax law. This could be useful for defense personnel receiving a disability pension.

When a serving staff member suffers consequential injury and disability during his tenure, he is entitled to a disability pension. The granting of the defense pension and related benefits has evolved over the years towards a liberalized pension system. The Pension Act and its regulations establish various eligibility criteria for receiving the disability pension. To name a few, if the percentage of disability is assessed and accepted at 20% or more, a disability pension is granted. Similarly, pension eligibility also depends on the reason for disability; when it is attributable to military service, then only a disability pension is granted.

At the time of payment of the invalidity pension, the tax laws stipulate that the TDS does not have to be deducted. However, Circular No. 13/2019, dated June 24, 2019, specified that the tax exemption will only be available to armed forces personnel disabled from service due to bodily incapacity attributable to or aggravated by this service. , and not to retired or retired staff. Otherwise. As a result, the government issued a circular ordering banks to deduct income tax from retirement and disability benefits paid to disabled retired military personnel.

Subsequently, the banks’ sudden deduction of tax debts from disability pensions caused public outrage forcing the government to keep the decision in abeyance. Later, the government ordered Defense Accounting to withdraw the TDS levy circular on these pensions.

Therefore, the TDS should not be deducted from the disability pension received by military personnel who have been discharged due to a disability attributable to military service.

However, there have been cases where the tax was mistakenly paid by the taxpayer when filing the ITR or the TDS was deducted from the Full Disability Pension when it was paid by means of an Order taken by an authority for several years together. There could also be a case where the ITR is not deposited because the amount does not exceed the basic exemption and the TDS is deducted on the disability pension paid for the previous years.

In all of the above scenarios, military personnel may seek reimbursement of TDS by making a request to the respective authorities under Section 119(2)(b) read with Circular 9/2015.

On February 28, 2019, in Madan Gopal Singh Nagi Vs. Commissioner of Income Tax, Section 119(2)(b) refund application was filed before the tax officer. Assessment (AO) by an Indian Army Officer having the rank of Second Lieutenant related to erroneous payment of tax on the amount of Disability Pension. Repeated requests were made to the AO but the amount was not refunded due to some technical details. The petition was filed in the Hon’ble High Court of Madhya Pradesh and it was ruled that “our army soldiers, navy officers and fighter pilots guard day and night our territorial borders from the infiltration and enemy attacks and even putting their lives at risk of life”. the greatest risk, ensure the safety of all citizens and make our life free from all these dangers, where they do not think of the “technicalities” when fighting with enemies at the front, as to whether pressing on the trigger of their gun would invite a “Court of Inquiry” and from this practical perspective, this Court wants to express its concern not to put too much technical detail into such matters by those vested with administrative powers to deal with and decide Indian Armed Forces Personnel Affairs. »

In the end, the court ruled in favor of the claimant and ordered the ministry to repay the amount plus 12% interest per annum.

Similarly, on August 29, 2019, in Col. Ashwini Kumar Ram Singh Vs. Chief Commissioner of Income Tax, the claim for refund was made as TDS was deducted on Disability Pension paid together from 2007-08 to 2015-16, i.e. for 9 years. The pension was released by order of the Armed Forces Tribunal. However, a partial refund was released by the AO because the reimbursement request processing period from 2007-08 to 2011-12 exceeded six years and therefore exceeded the period prescribed in Circular No. 9/2015 from 9-6. -2015. The petition was filed in the Honorable High Court of Madhya Pradesh and the court itself tolerated the delay in filing the complaint instead of asking the Colonel to file the complaint in the council. Again, the court considered bringing justice to the claimant immediately and ordered the authorities to refund the TDS amount.

It should be noted that such claims will only be allowed if the non-compliance was due to the taxpayer facing genuine hardship.

Keval Sonecha is a partner at Sonecha & Amlani.

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TDS on Disability Pension – A Case for Indian Armed Forces Personnel PTI Photo (PTI7_25_2010_000051B) (Sgr- Mohd Amin War)

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