Tax Benefits for Indian Defence Personnel
Serving and retired members of India’s defence forces, including the CAPF and other security agencies, are eligible for several specific tax exemptions and deductions under the Income Tax Act, 1961. While many general tax benefits apply to them, the following are exclusively tailored for defence personnel.
Key Tax Exemptions
- Gratuity and Commuted Pension: Under Section 10(10) and Section 10(10A), gratuity and commuted pension are fully exempt from tax for government employees, including defence personnel.
- Gallantry Awards: Section 10(18) offers a complete tax exemption on the pension received by individuals who have won gallantry medals like the Param Vir Chakra, Maha Vir Chakra, or Vir Chakra. This benefit also extends to family pensions for their dependents.
- Family Pension: As per Section 10(19), family pension received by the widow, children, or other nominated heirs of armed forces personnel who died during operational duty is fully exempt.
- Welfare Funds: Income from Regimental or Non-Public Funds, set up by the armed forces for the welfare of their members and dependents, is exempt under Section 10(23AA). Similarly, Section 10(26BBB) exempts the income of corporations established for the welfare of ex-servicemen.
Deductions and Other Benefits
- Agnipath Scheme: Section 80CCH provides a deduction for contributions made to the Agnipath Scheme and Agniveer Corpus Fund.
- General Deductions: Defence personnel can also claim standard deductions available to all taxpayers under the Old Tax Regime. This includes Section 80C (for investments), Section 80D (for medical insurance), and others.
Union Minister of State for Finance, Pankaj Chaudhary, recently stated that current Income Tax Return (ITR) forms don’t capture specific details about a taxpayer’s employment within defence or paramilitary forces. This makes it challenging to track how many personnel are utilizing these unique tax benefits.