Explainer on the concept of Disability Pension, Invalidation, and the recent controversy over tax exemption thereupon, viewed historically
by Navdeep, indianmilitary.info
June 28, 2019
Though I would be soon writing a detailed opinion piece again on military disabilities and our faulty approach on the same, it becomes important to put out some data and a few historical facts on the recent controversy.
The CBDT Circular: The CBDT has recently issued a circular stating that Income Tax Exemption on disability pension would only be allowed to those disabled personnel who are invalided from military service and not to those who are released on completion of tenure or superannuation. It seems that the term ‘invalided’ has been taken by the CBDT to mean those who are medically boarded out prematurely from military service before their actual retirement, discharge or superannuation. The controversy over this term is however not new. However, it becomes important to clarify this issue in its historical perspective since some of this information would not be available with the Finance Ministry, the CBDT, the Ministry of Defence and even the Defence Services.
History of Disability Pension: Wound, Injury and Disability Pension has remained applicable to military personnel (combatant as well as non-combatants and even ‘private servants’ of officers during old times), in one form or the other since the days of the Crown. As the terminology suggests, it was granted for disabilities suffered during the course of service or illnesses incurred while in service.
The term ‘Invalid’: The term invalid or invalided in military parlance simply referred to a person who became an Invalid (disabled) while in military service. It had no connection with “invaliding ‘out’ prematurely from military service”. A person who was disabled while in military service was termed as an Invalid and when such a person was discharged, whether prematurely or on completion of his terms, he was discharged through a medical board and termed “invalided from” service (and not invalided ‘out’ of service).
Exemption of Income Tax, 1922: Income Tax was exempted in the year 1922 for invalid soldiers and the same terminology as above was used in the applicable military instructions as well as the exemption granted by the Finance Department.
Governor General’s Orders of 1926: Disability Pension attained exalted status in the year 1926, when GM Young, the then Secretary to the Government of India, Army Department, issued a notification in the name of the ‘Governor General in Council” stating therein that no public claim or public debt shall be recovered from the Wound, Injury or Disability Pension of an officer or soldier. It may be noted that this was applicable to disability pension across the board and the term ‘invalided’ was not even pressed into service.
Confusion caused by 1940 Regulations: The confusion on the term ‘invalided’ however raised its ugly head when Pension Regulations, 1940, were published. Here, the term ‘invalided’ was used in provisions related to disability pension giving an impression that the term applied only to those who were prematurely boarded out of the military. Although, the same regulations in the same breath also stated that a person retiring on completion of service limits would be granted benefits ‘as if he had been invalided’, again multiplying the confusion.
Corrective action by Government of India to clear the confusion: The problem created by the original (correct) definition of ‘invalided’ as also signified by the notification issued by the Secretary, Army Department, and the one that came to be incorrectly understood by military accountants due to the publication of Pension Regulations 1940, however was resolved by the Government of India once and for all in the year 1950 when the Entitlement Rules, 1950, were promulgated and it was specifically underlined and provided that the term ‘invalidation’ for the purposes of disability pension shall mean all military personnel who at the time of release from service are in a medical category lower than the one in which they were recruited. Meaning thereby, all Low Medical Category personnel who were fit at the time of entry into service were conclusively declared to be falling under the category of ‘invalidation’ thereby bringing the definition back to its origins. These Rules of 1950 were officially appended with the existing Pension Regulations by the order of the Central Government. This was further provided in Ministry of Defence Letter No A/22255/AG/PS4 (d)/2725/Pen-C dated 05 November 1969. The same was reiterated later in the form of Rule 4 of Entitlement Rules, 1982. Needless to state, this action was very important and required since there can be multiple categories of disabled personnel within the Army and to perpetuate discrimination amongst them based upon the type of exit from service would amount to hair-splitting. Some such categories are- those who are prematurely boarded out since they are unable to cope up with life in the military after getting disabled, those who opt to continue and serve despite the disability and then retire on regular completion of terms/service limits, those who are discharged since no ‘sheltered appointment’ is available, those who opt out of service because of lack of promotion due to disability, those who are not promoted and hence retired early at the age prescribed for lower ranks etc
Litigation: The discrimination between disability benefits between those who are prematurely medically boarded out and those who opt to continue to serve the nation despite the disability also became a subject of many a litigation. Some such examples are Civil Writ 2967/1989 Mahavir Singh Narwal Vs Union of India as affirmed by the Supreme Court in SLP 24171/2004 disposed on 04 Jan 2008 wherein the Delhi High Court explained and interpretation the term ‘invalidation’ and the decision of the Supreme Court in Civil Appeal 418/2012 in Union of India Vs Ram Avtar and of course in Civil Appeal 5591/2006 KJS Buttar Vs Union of India.
Going back to the confusion of 1940: The term “invalidation” is hence adequately defined by the Rules of the Government and interpreted by Constitutional Courts. The CBDT, it seems, has however restrictively interpreted the term as per its confused definition as it existed between 1940 (When Pension Regulations, 1940 were promulgated) and 1950 (When Entitlement Rules, 1950 were put into force to clarify the term ‘invalidation’).
Demonisation of military disabilities: What we also see today is unnecessary demonisation of military disabilities. The incidence of aggravation of disabilities in military personnel is much higher than civilian employees simply due to the reason of frequent movements and unsettled life (which ironically continues even in peace family stations due to an extreme shortage of family accommodation), regimented lifestyle and barrack life away from family, inability to cater to domestic commitments, inability to fulfil sexual desires, curtailment of freedoms, applicability of a disciplinary code 24X7, exposure to stressful situations including operational areas etc. Disability hence is not a sign of weakness and even the bravest of the brave battle-hardened soldier can fall prey to it. As far as the rumour of Generals cornering disability claims is concerned, the incidence of a disability incurred in-service is bound to be higher in senior ranks simply because they retire in their late 50s (upto the age of 60) while soldiers start retiring in their 30s. The allegation of ‘fake’ or ‘feigned’ disabilities (though not the reason for the CBDT Circular) is also laughable since the incidence of disability is first endorsed by an Initial Medical Board, then by re-categorization medical boards and then finally by the Release Medical Board at the time of retirement. There are hence multiple doctors, all different and at different locations in the country, who endorse the existence of a medical condition and its percentage. So far as the thought as to why aggravated disabilities such as heart disease, hypertension, depression, neurosis, psychosis etc are eligible for disability benefits is concerned, the same is not some kind of a favour to our soldiers since it is provided in pensionary rules for military as well as other uniformed personnel that such disabilities are affected by stress and strain of service and eligible for disability benefits.
Rules for disability benefits in India
Disabilities in other democracies, their incidence and tax status: In this context, it would be instructive to examine military disabilities in other nations. An apt example would be the US which also has an operationally committed military and the pension rules are pretty much similar to ours and numerically the active duty personnel are roughly the same. As per the official data maintained by the Government, the incidence of disability in the military has gone up in the US by 117% from 1990 to 2018. Also, a total of 4.75 million veterans in the US are in receipt of disability benefits (See official data here). In our country, the number of disability pensioners is estimated to be less than 0.2 million. The disability pension and compensation in the US is exempted from Tax as provided by Publication 525 of the Internal Revenue Service. Should we be concerned about the rise of incidence of disability in our soldiers and their deteriorating health profile and provide them with comfort, care and succour, or should we denigrate those who are suffering from illnesses and rather count pennies? More than others, I ask this from the serving military fraternity.
Veterans with Disability Benefits in the US
Tax Exemption to disabled veterans in the US
The above is meant to clarify the technical and factual details on the subject since most of the debate on the matter was following an emotional track. Emotions and high sounding words like ‘sacrifice’ etc etc aside, the matter has to be dealt under the right technical perspective and I am personally sanguine that the political executive would be able to address this issue if provided the correct inputs and data.
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