The Ministry of Defence on Tuesday has directed the Principal Controller of Defence Accounts (PCDA) to stop deducting income tax from those pensioners affected by disability and withdraw the contentious circular issued to that effect.
The ministry stated in the order that, “In view of the directions of the Supreme Court, PCDA(P), Allahabad may be directed to issue a circular to Pension Disbursing Agencies not to make the recovery of income tax on disability pension as per Central Board of Direct Taxes (CBDT) Circular No. 210 dated February 20, 2020, till a final decision is taken by the Supreme Court in the matter,” The order was issued with the approval of Secretary (Defence Finance).
It was a sensitive matter concerning the retired pensioners along with the others in the armed forces and represents a rollback of a decision taken last year.
Last year, The PCDA, Allahabad had released a circular, dated February 20, for “necessary action” on a Central Board of Direct Taxes (CBDT) June notification, which stated that ” tax exemption 
The IT department said that to demand income tax exemption, online applications must be filed by hospitals, religious trust, educational institutions and charitable. Read More on disability pension would be available only to armed forces personnel who had been invalidated from service due to disability, and not be available to personnel who had been retired on superannuation or otherwise”. Last year’s move resulted in an outcry in the defence fraternity and Defence Minister Rajnath Singh promised to look into the matter.
Defence Minister Rajnath Singh had later suggested that disability pension for military personnel need to be excluded from income tax only up to a certain limit and taxed beyond that.
