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TDS on disability pension – case for Indian Armed Forces personnel

As India celebrates its 75th anniversary of independence, it is important to shed light on certain benefits offered by the Central Board of Direct Taxes (CBDT) to Indian armed forces personnel. One such benefit is in Section 119(2)(b) of the Income Tax Act.

The Income Tax Act provides an opportunity for any taxpayer under section 119(2)(b) to claim a TDS refund, exemption, deduction or any other tax relief under the Income Tax Act. This could be useful for defense personnel receiving disability benefits.

When a service worker suffers a consequential injury and disability during service, he or she is eligible for a disability pension. Defense subsidies and related benefits have evolved over the years towards liberalizing the pension system. The Retirement Act and Regulations set out many eligibility criteria for disability benefits. To name a few, if the assessed and accepted disability rate is 20% or more, a disability allowance will be provided. Similarly, pension eligibility also depends on the reason for the disability; when stipulating military service, only then will you receive disability benefits.

At the time of disability pension payments, the tax law states that TDS is not required to be withheld. However, Circular No. 13/2019, dated 24 June 2019, clarifies that the tax exemption will only apply to service members of the armed forces who have been injured due to physical disability or aggravated caused by that service, and does not apply to employees retiring under retirement or otherwise. Accordingly, the Government has issued a circular directing banks to withhold income tax on pensions and disability benefits for retired disabled military personnel.

Then, banks’ sudden withholding of tax liabilities on disability pensions led to public outrage forcing the government to uphold the decision. The government subsequently directed the defense accounts department to withdraw the circular withholding TDS for such pensions.

Therefore, TDS is not deducted from the disability pension of military personnel who have been injured while serving as a result of a military service injury.

However, there have been cases where taxpayers mistakenly paid at the time of filing an ITR or TDS that was deducted from a total disability pension when it was disbursed by order of a competent authority for many years together. There may also be cases where the ITR is not paid because the amount does not exceed the basic exemption and the TDS is deducted from the disability pension disbursed for previous years.

In all of the above cases, military personnel can request reimbursement of TDS by making an application to the respective authorities according to section 119 (2)(b) read attached to circular 9/2015.

On February 28, 2019, in the case of Madan Gopal Singh Nagi Vs. Commissioner in charge of income tax, an application for a refund under section 119(2)(b) has been filed before an Assessment Officer (AO) by an officer of the Indian Army with the rank of Second Lieutenant in connection with the incorrect payment of tax on pension disability. Repeated requests were sent to AO but the amount was not refunded due to certain technicalities. The lawsuit was filed in the Hon’ble High Court of Madhya Pradesh and asserts that “our army soldiers, naval officers and fighter pilots are guarding the border day and night. our territory from enemy infiltration and attack and even while putting their lives at greatest risk, is to keep all citizens safe and secure and make their lives we get rid of all such dangers, where they don’t think “technically” while fighting the enemy ahead, like whether pulling their trigger invites a “Court of Inquiry” and from This factual perspective, this Court wishes to express its concern for not placing too much technicality on such matters for those who have been given administrative power to deal with and decide on the affairs of the people. members of the Indian Armed Forces. “

In the end, the court ruled in favor of the petitioner and directed the department to repay the amount along with 12% annual interest.

Similarly, on August 29, 2019, the case of Colonel Ashwini Kumar Ram Singh Vs. Principal Commissioner for Income Tax the application for a refund was made because the TDS was deducted from the disability pension issued together from 2007-08 to 2015-16, i.e. for 9 years. The pension is released by order of the Armed Forces Court. However, the AO issued a partial refund because the period of application of the refund from 2007-08 to 2011-12 exceeded six years and accordingly, it exceeded the period specified in Circular No. 9. 2015 June 9. -2015. The suit was filed before the Hon’ble High Court of Madhya Pradesh and the court itself condemned the delay in filing the lawsuit instead of requiring the colonel to file the suit before the board. Again, the court considered granting immediate justice to the petitioner and directed the authorities to refund the TDS amount.

It should be noted that such complaints will only be allowed if the non-compliance is due to the taxpayer facing genuine hardship.

Keval Sonecha is a partner of Sonecha & Amlani.

TDS on disability pension - case for Indian Armed Forces personnel PTI Photo (PTI7_25_2010_000051B) (Sgr- Mohd Amin War)

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TDS on disability pension – case for Indian Armed Forces personnel PTI Photo (PTI7_25_2010_000051B) (Sgr- Mohd Amin War)

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