Taxing Disability pension

Syed Ata Hasnain
With increasing frequency, issues related to the personnel administrative aspects of the Indian Armed Forces seem to be regularly coming to the fore due to lack of understanding of the service conditions and challenges soldiers face during their careers. Mostly these are perceived as direct result of the awkward civil-military relationship which has existed since 1947 and the supposed ever readiness of civil servants to divest the armed forces cadre off service privileges granted over time. However, this time a strange case has arisen. It relates to those personnel who superannuate at the end of their service contract with injuries sustained in war, internal service duties or accidents which are attributable to service conditions. Included in this segment are those whose life style ailments too are aggravated by such service conditions. All these personnel, as per procedure, appear before a duly constituted medical board which classifies their percentage of disability which in turn entitles them to a disability pension which along with the service element of the pension is not taxable. It’s a privilege not reserved for personnel of the armed forces alone but for various other government servants retiring from Central Government Departments and regulated by the Central Civil Services (Pension) Rules, 1972; an example are the central armed police forces (CAPF).
So what is the problem now? The Central Board of Direct Taxes (CBDT) through a circular in end Jun 2019 decided to do away with the tax exemption for disabled soldiers except those who get invalidated out of service due to attributable reasons and did not complete their contracted service. The impact of the decision is that all those who decided to continue in service till age of retirement, even after being injured and placed in a low medical category, on exit will not be exempt from income tax. The tax exemption on disability pension is a privilege enjoyed by many government services with not an iota of the type of physical threats faced by soldiers in field and peace conditions or the stress and strain due to regimented living away from families and always available for duty 24×365. Thus by the implementation of the order a strange thing will be prevalent in India and perhaps nowhere else in the world. Disabled soldiers will be taxed for the pension they earn and disabled civil servants will be exempt from tax, a strange paradox indeed.
When the CBDT circular was released it created tremendous consternation among the veteran soldier community all over India because it was perceived to be the outcome of yet another case of civil military discord which has been steadily increasing to the level of virtual animosity today. One of the most respected disabled veterans of the armed forces, Maj Gen Ian Cardozo (Retd) spoke on a television panel and laid the responsibility for the strange decision at the doorstep of the bureaucracy which he strongly felt hated the armed forces. However, as the week progressed and the armed forces were silent it started to become evident that the decision was not a standalone one initiated by civil servants or anyone from the political leadership; it was the Army’s leadership which had quietly forwarded the proposal. It is not even known whether the other two services (Air Force and Navy) were on board and whether detailed analysis and consideration had been looked at in terms of impact. The facts came to light after the Finance Minister’s office released an unsigned statement which included the reasons and clearly alluded to the fact that the proposal had come from the Service Headquarters itself.
Why did the Army leadership decide to shoot its own personnel in the foot on a privilege which not they alone but the entire central government services enjoy needs analysis. It’s also important to point out that the government need not have acted with such alacrity on an issue which anyone could have assessed would have deep negative impact in an element of society revered across most of India. The same alacrity was not evident when the nonfunctional upgradation (NFU) proposal was forwarded to the government by the armed forces, nor was the observations and anomalies of the 7th and 6th Pay Commission treated such. In fact a major part of the 6th Pay Commission anomalies are still languishing which no apparent intent to rectify them. That is where the perception about bureaucratic antipathy comes from.
Procedurally what the armed forces leadership did was in the perception of the veteran community something unbecoming. Recommending removal of a privilege, without an iota of consultation with those affected and no evidence of deep understanding and institutional study is not something taken kindly in a profession where camaraderie and brotherhood, from womb to tomb, are considered pillars of organizational effectiveness. One can perceive the problem from the Army’s point of view. The judiciary has been kind to the litigants from the armed forces and other organizations regarding individual cases of disability. Besides that the broad banding of disability percentages has given the disabled personnel much greater financial advantage. As a consequence disability has become an attractive aspect of government service, at least for those who have intent of manipulating financial advantage for themselves. It hardly matters to civil servants who have mostly to serve in a sedentary environment, or at least nothing even close to the kind of challenging conditions in which Army personnel have to serve. However, the Army must have maximum physically fit personnel who have no restrictions on their employment. The challenge for the Army emerges when personnel in later stages of their service and especially after being overlooked for promotion prefer to serve in a safe and stable environment in peace stations. This can be done by seeking low medical category (LMC) status or persistence in the category even after overcoming an originally genuine medical problem. It gives the chance also to seek disability status at the time of retirement. The above statement must not be taken as a generalization and is actually applicable to just a few who attempt to acquire such category and status for personal gain without moral considerations. The Army leadership is particular concerned about the number of LMC personnel because it reflects on ‘bayonet strength’, and therefore wishes to dissuade its personnel from seeking or remaining in LMC status leading to eventual disability, for the sake of overall efficiency.
The unfortunate thing is that in its hurry to find solutions the Army leadership has been brash and insensitive and the government instead of balancing that approach with wisdom of 360 degree consideration has added fuel to the fire. For the sake of a few culprits an entire community of genuinely disabled soldiers, whether battle casualties, battle accidents or simply cases of aggravated lifestyle diseases, has been stigmatized. It’s an old adage of leadership in the Army; never implement mass punishment for the sake of a few because the blowback from it will always singe you. By implementing mass punishment the Army’s leadership is only admitting administrative incapability. In an organization which boasts of finding solutions to the most intractable challenges. Surely identifying a few culprits in an already well set out system of boards, reviews and approvals at different levels should not be a problem.
Nothing is lost, not even pride. Mistakes are made and also admitted. Ego must not stand in the way in rectifying them. With our sage and mature political leadership and by all means a bureaucracy which can be convinced of the ills of such a decision the Army leadership must display its ability to rise above the ordinary to be counted.
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