Congress Criticises Tax on Disability Pension

The Congress party on Wednesday strongly criticised the government’s decision to levy income tax on disability pensions of disabled armed forces personnel, calling the move an insult to the sacrifice of soldiers. The party demanded an immediate rollback of the provision introduced under the Finance Bill 2026, warning that the decision could have a serious impact on the morale of defence personnel and veterans.

Addressing a press conference, Col. (retired) Rohit Chaudhry, Chairman of the Ex-Servicemen Department of the All India Congress Committee (AICC), expressed deep concern over the policy change. He was joined by Col. (retired) S.P. Singh of the Indian Ex-Servicemen League, who also criticised the move.

The leaders argued that the new tax provision restricts income tax exemption only to those armed forces personnel who were wounded in action and subsequently invalided out of service. According to them, this change removes tax exemption benefits from a significant number of personnel who suffered disabilities but were either retained in service or whose disabilities were attributable to or aggravated by military service conditions.

What the Finance Bill 2026 Proposes

Under the earlier system, disability pensions for armed forces personnel injured in action or whose disabilities were linked to service conditions were exempt from income tax. This exemption applied whether the personnel were invalided out or retained in service.

However, as per the Finance Bill 2026, the exemption is now limited. Only those soldiers who were wounded in action and invalided out of service due to bodily disability will continue to enjoy tax-free disability pensions.

According to Congress leaders, this effectively removes the exemption from:

• Personnel injured during action but retained in service

• Personnel whose disabilities were attributable to military service conditions

• Personnel whose disabilities were aggravated by harsh service conditions

Col. Chaudhry alleged that this narrowing of eligibility significantly reduces the number of beneficiaries who can claim tax-free disability pensions.

Demand for Restoration of Earlier Provisions

The Congress party has demanded restoration of the earlier status under the Income Tax Acts of 1922 and 1961, which kept such disability pensions outside the tax net.

According to Col. Chaudhry, both the 1922 and 1961 Acts provided a broad exemption covering disability pensions granted to personnel injured in action or whose disabilities were attributable to or aggravated by service conditions.

He said that the new clause in the Finance Bill effectively overturns decades of policy continuity.

The party has urged the government to retain full tax exemption on disability pensions and withdraw what it called the restrictive disability policy introduced in 2023.

Impact on Soldiers’ Morale

One of the central arguments put forward by Congress and ex-servicemen representatives is the potential impact on morale within the armed forces community.

The leaders described the move as not just a financial issue but a symbolic one. Disability pensions are seen as recognition of the sacrifices made by soldiers during service. Taxing these pensions, they argued, sends a discouraging message.

Col. Chaudhry termed the decision an “insult” to soldiers who risk their lives for the country. He said such measures could negatively affect serving personnel who expect fair treatment if they are injured in the line of duty.

The ex-servicemen community echoed similar concerns. They emphasised that disability often results from extreme operational conditions, high-altitude postings, and exposure to combat zones. Therefore, the financial compensation provided through disability pensions carries moral and emotional significance.

Background: Attempts Since 2016

During the press conference, Col. Chaudhry alleged that attempts to tax disability pensions have been made since 2016. He claimed that successive efforts were resisted due to strong opposition from veterans and political parties.

According to him, the current amendment represents a continuation of that effort, but in a more limited and targeted form. By restricting exemption only to those invalided out after being wounded in action, the government has narrowed the scope significantly.

The Congress party contends that such a policy shift was not adequately discussed with stakeholders, including veterans’ associations.

Legal and Policy Context

Under the earlier framework, disability pensions were treated as compensation for injuries sustained in service to the nation. The exemption was justified on humanitarian and moral grounds.

Legal experts point out that the difference between being invalided out and being retained in service can sometimes be administrative rather than substantive. Two soldiers with similar injuries could be treated differently based on medical boards and service requirements.

By restricting exemption to only those invalided out, critics argue that the policy creates inequality among similarly placed personnel.

Supporters of the government’s move may argue that tax policy reforms aim to rationalise exemptions and broaden the tax base. However, the Congress party insists that disability pensions should remain fully exempt due to their unique nature.

Voices from the Ex-Servicemen Community

The presence of representatives from the Indian Ex-Servicemen League at the press conference indicates wider concern within the veterans’ community.

Ex-servicemen leaders have urged the government to reconsider the move and hold consultations. They argue that disability pensions are not regular income but compensation for physical and mental hardship endured during service.

Veterans’ groups have also warned that any perception of reduced support for injured personnel could affect recruitment and retention in the armed forces.

Political Dimensions

The issue has also taken on political significance. The Congress party has positioned itself as a defender of soldiers’ welfare, particularly on matters related to pensions and benefits.

In past years, debates over One Rank One Pension (OROP) and other defence welfare measures have sparked political exchanges between ruling and opposition parties.

By raising this issue, Congress aims to highlight what it sees as inconsistencies in the government’s commitment to veterans’ welfare.

The government, on its part, has not yet issued a detailed response to the criticism.

Financial Implications

The exact financial impact of the change is yet to be fully assessed. Disability pensions vary depending on rank, severity of disability, and years of service.

If taxed, the net income of affected personnel could decrease. Critics argue that this reduction may be significant for veterans who rely heavily on pension income for medical treatment and family expenses.

Given that many disabled veterans may face ongoing medical challenges, additional financial burdens could create hardship.

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