New Delhi/Chandigarh, March 31
Chandigarh MP Manish Tewari has asked the Union Finance Minister to explain the rationale behind the amendment in the Finance Act, 2026, which restricts tax exemption on disability pension only to personnel invalided out of service.
Raising the matter through Unstarred Question No. 5780, Tewari further sought to know whether any empirical data or impact assessment was undertaken to justify the differential treatment between invalided-out and superannuated disabled veterans and if so, the details thereof.
Tewari has further sought information on whether the Government has examined the constitutional implications of differential treatment between similarly placed disabled veterans based on their mode of exit from service and if so, whether the Ministry of Defence was consulted and its views obtained prior to introducing the amendment, along with the details thereof. He also questioned what are the details regarding the number of veterans likely to be affected, the estimated additional revenue expected to accrue and whether the Government proposes to provide transitional protection, clarify eligibility criteria and establish a grievance redressal mechanism for affected veterans and if so, the details thereof.
Responding to Tewari’s question, the Minister of State for Finance, Pankaj Chaudhary said that with the enactment of the Income Tax Act, 2025, which will come into effect from 1st April, 2026, the Income Tax Act, 1961 will stand repealed from that date. “Consequently, the earlier enactments pertaining to the Income Tax Act, 1922 and the related savings provisions in the Income Tax Act, 1961 will also cease to operate. In the absence of an express provision in the Income Tax Act, 2025, the exemption provided for disability pension would have lapsed. Therefore, this provision was specifically included in the Finance Bill, 2026, to ensure the continuation of the exemption that existed earlier, including its scope and condition”, he added.
The Minister further said that since the matter is sub-judice, it has created certain implementation issues, adding, “Therefore, to address the practical issues of the present prevailing situation, the amended provisions shall apply on or after such date as may be notified by the Central Government in this behalf. Pending such notification, the entire disability pension, that is, disability element and service element of a disabled officer of the Indian armed forces shall be exempt from Income-tax.”
Responding to the Minister’s reply, Tewari said that it is extremely unfortunate that the Central Government has betrayed the sentinels of the nation by restricting the disability pension to only those service personnel who are invalidated out of service in the Fimance Bill “Thousands of veterans across the country have been protesting against this arbitrary, capricious and malafide malpractice. The answer only poignantly underscores that betrayal. Therefore rather than leaving it to the courts the offending section in the Finance Bill should have been withdrawn en-toto whereby an artificial distinction between those disabled service personal invalidated out of service and those who are disabled but continue to be in service needs to be erased,” he concluded.
