Mumbai: The Union Government denied tax exemption on disability pension of the Indian Armed Forces. Addressing a press conference, AICC Ex-Servicemen Department chairman Col. (retired) Rohit Chaudhry, along with Col. (retired) S.P. Singh of the Indian Ex-Servicemen League, said that as per the Finance Bill 2026, the income tax exemption was granted to only those personnel who were wounded in action and were invalided out of service, according to the Hindu, on receiving a bodily disability.
This divide creates a void, alienating the veterans who served fully despite injuries, and the only question that echoes is: What about the ones who are serving with disabilities?. Soldiers have a right to live with dignity as promised by Article 21 of the Indian Constitution.
Speaking to the Free Press Journal, Punit Mota, proprietor of Punit Mota & Co Chartered Accountant, said, "Watching a loved one serve through pain only to lose tax relief on normal retirement feels unjust. (Talking about the tax relief for those invalided out of service), The invalidment exemption rightly compensates for that forced exit."
Emphasizing the cost of resilience, he said that for decades, the disability pension has been seen as a necessary compensation- a small amount of financial support for the physical impact of military service. However, the latest updates in the Union Budget 2026 have clearly divided those who are "forced out" by their injuries from those who choose to continue serving. Hence, the ones serving have to pay for their resilience.
Punit Mota explained the "Great Divide between Invalidation vs. Endurance. The main issue lies in Section 10(18) of the Income Tax Act. The law now makes an important distinction not based on the level of an injury, but on when someone exits the service."
The Invalided Out: If a soldier is discharged early because a medical board decides they are unfit for further service, their entire pension remains tax-free. This acknowledges a career that was cut short.
The Resilient: For the soldier who suffers a disability but completes their full service (superannuation), things have changed.
As of April 1, 2026, the tax authorities no longer view this as a disability exemption but treat it as regular taxable income. Watching a loved one serve while in pain only to lose tax relief at a normal retirement feels like a penalty for resilience. Emphasizing his earlier point, he says, the 'invalidment' exemption correctly compensates for a forced exit, but it inadvertently leaves the long-serving veteran without support.
Punit Mota explains that previously, the "Service Element" and "Disability Element" were mostly exempt if the injury was due to military service. "The new Finance Bill significantly tightens these rules. By restricting full exemptions only to those "invalided out due to bodily disability," the government has effectively created two categories of veterans. One veteran might retire at 40 due to a medical discharge and pay no tax; another, with the same injury, might continue to 55, only to find their disability element now taxed at standard rates," he added.
This issue is not just about numbers; it’s about the image of "Valour vs. Taxation." Critics say this goes against the spirit of Article 14 (Equality), questioning why the tax treatment is different when the physical sacrifice is the same. He concludes that, for the veteran community, the message is unclear: it rewards injury but seems to punish endurance. As we enter the 2026 fiscal year, this distinction will likely lead to legal challenges and increased advocacy for veterans. At its core, this debate is not about taxation; it is about human dignity.
