Disability pension is tax-free

SC Vasudeva

I am a retired Army officer and drawing pension on superannuation as per pension payment order (PPO) issued to me. In addition to the pension, I am also getting disability element (not disability pension) as I was suffering from a disability which was more than 20% and attributable to military service. For this disability, a monthly sum proportionate to the percentage of disability under the existing rules is also given to me.

As per Govt. of India, Min of Fin dept of Revenue CBDT inst no: 2/2001 forwarded vide letter no; F/200/51/99/T-1 dt.02 July  2001, military persons getting disability pension  consisting of two components (service element and disability) are exempted from paying income tax on the complete disability pension. Retiring pension is not mentioned in this letter. As I am drawing retiring pension on superannuation and in addition a small amount against disability element every month, please clarify whether I am entitled to exemption from income tax or not under the above mentioned letter. 

It is pertinent to mention here that disability pension is granted to service personnel who are invalid out from service on account of disability with no condition of minimum service and on the other hand retiring pension is permissible on superannuation with minimum 20 years of service. Retiring pension is a single component only.

In case retiring pension is not exempted, can I claim exemption of the income received separately against disability element? — P Singh

The letter of Government of India referred to by you in your query specifically provides that disability pension consisting of two components i.e. service element and disability element are exempt from tax. The letter referred to by you reiterates the position about the disability pension stated in earlier letter No. F.No.200/51/99-ITA-I dated 6th May, 2000. The letter dated 02 July 2001 as well as the earlier letter do not mention about the pension received on superannuation. A literal meaning of the words used in these letters give an indication that the pension received on superannuation to the extent not commuted would not be exempt from tax.  You can, however, claim exemption in respect of disability pension on the basis of the said letters.

We are a small scale industry functioning in the rural area (district Ludhiana).

Besides our industrial interests, we want to contribute our share in the advancement of society by generating sources of income for the women belonging to the weaker sections of society by way of giving employment.

For this, we are planning to buy a 42-seater bus, exclusively to ferry women to our factory and back to their houses free of cost.

Please advise about the kind of tax exemptions available/applicable along with tax rates/slabs and requirements. — Hardev Singh 

You would be entitled to claim depreciation on the 42-seater bus which would be used for ferrying women to your factory and back to their houses.  You will also be entitled to claim expenditure on the running and maintenance of such vehicle as such bus is exclusively used for the employees of the company. There is no other benefit allowable to an assessee in respect of expenditure of the nature described by you in your query.