No tax deduction on disability pension to Armed Forces: Govt
December, 22nd 2007
The government on Thursday said that there will be no deduction of income tax on payment of disability pension to the beneficiaries from the Armed Forces.
"Banks have been advised to issue suitable instructions to all their pension disbursing branches that income tax should not be deducted from the disability pension paid to the pensioners of the Armed Forces," a Finance Ministry statement issued here said.
Referring to some media reports that some banks were deducting tax from pension of disabled ex-servicemen in violation of government instructions, the finance ministry approached the Reserve Bank to investigate the matter and take remedial measures.
After investigation, RBI discovered that in one specific instance, due to oversight, the disability pension was wrongly taken into account while calculating income tax, the statement said.
Consequently, the apex bank issued instructions to all agency banks to strictly adhere to the provisions of the Defence Pension Payment Instructions, 2005, and not to deduct any income tax on disability pension to the ex-servicemen, it added.