System being exploited, says note.

Responding to growing criticism over a Finance Ministry decision to tax the disability pension of military personnel, Minister Nirmala Sitharaman put the onus for the initiative on the Army.

In a message on Twitter, Ms. Sitharaman’s office put out an unsigned note calling it the “response of the Armed Forces on the issue of taxability of disability pension” which states that “unscrupulous personnel” have found leverage in the existing system for seeking financial gains through their disabilities.

Disability is granted to personnel who are disabled in combat or during peace and their disability is attributable to service conditions, the note states, and observed: “The latter have somehow exploited the weakness in the mechanism, for grant of disability pension and alongwith the tax exemption.”

Stating that remuneration alone cannot compensate for the disabilities of those injured in battle, the note said the service must continue to provide them necessary support during service and post their superannuation. “This aspect is being exploited by unscrupulous personnel, who have gained from disability benefits provided to disabled soldiers,” the note said.

The Army, the unsigned note says, is concerned about the personnel who are boarded out because of their disability and need additional financial support. “There should be no segregation amongst genuinely disabled personnel. At the same time, those who have found the leverages in the existing system for seeking financial gains through their disabilities, need to be scrutinised and taken to task, wherever necessitated,” it added.

The note also states that the broad banding and higher compensation awarded for disability with tax exemption has over the years led to rise in personnel seeking disability, even for life style diseases.

The note ends stating that the trend “if not checked at this stage, is a cause for worry,” as Army cannot have large number of personnel with “medical disabilities in the rank and file, when the security challenge to the nation are on the rise.”

In a notification dated June 24, the Central Board of Direct Taxes (CBDT) under the Finance Ministry said that “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.”

Similar observations on the rising claims of disability by officers before or just after superanuation were made in December 2014 by the Director General Armed Forces Medical Services (AFMS) in a letter to then Defence Secretary R.K. Mathur.