The Union Budget 2026 has triggered sharp concern within the armed forces community after the finance minister (FM) announced that disability pensions of armed forces personnel who continue in service until superannuation would be brought under the tax net. The proposal, as it stands, is not limited to serving personnel but is also expected to impact retired veterans, including those who fought earlier wars and are now of advanced age.
For the armed forces fraternity, the issue is not merely fiscal — it is moral and institutional.
Members of the armed forces take an oath to defend the nation at the peril of their lives. That commitment extends to operating in hazardous, hostile and life-threatening conditions without hesitation.
Disability in service is not a matter of choice; it is an occupational risk inherent to military duty. In that context, disability pension has long been treated not as income, but as compensation for physical loss and permanent impairment suffered in national service.
The Budget announcement has led to widespread disquiet, with veterans’ groups, sections of the public and several Members of Parliament expressing concern. At the same time, social media has seen a proliferation of conflicting interpretations, including forwarded messages attempting to justify the move by citing selective readings of earlier income tax provisions.
It is therefore necessary to set out the legal position clearly.
Under the Income-tax (I-T) Act, 1922, two separate categories of exemption existed. Paragraph 18 covered injuries attributable to or aggravated by service, while Paragraph 19 dealt with invalidment (official discharge or retirement of military personnel from service due to a medical condition, injury, or disability that renders them unfit for further duty) cases. Both categories were excluded from income tax. However, certain circulating messages have cited only the invalidment provision, omitting reference to injuries attributable to or aggravated by service.
Subsequent clarifications by the central board of direct taxes (CBDT), including Instruction No. 136/1970 dated 14 January 1970 and Instruction No. 2/2001 dated 2 July 2001, affirmed that disability pension — comprising both disability element and service element — was exempt from tax. Over the decades, this interpretation remained consistent and unambiguous.
In 2019, the CBDT issued circular no13/2019 dated 24 June 2019, stating that tax exemption would apply only to personnel invalided out of service and not to those who continued until superannuation. This circular was challenged before the Supreme Court in the Pradeep Mathur case (civil appeal no953/2019), and the operation of the circular was stayed. As a result, the earlier position effectively continued.
Veterans now contend that the Budget 2026 proposal seeks to reintroduce, through legislation, what was earlier attempted through administrative clarification and stayed by the court.
Beyond statutory interpretation lies a broader question of parity and policy.
For your info, I must share that the armed forces are not under the purview of the Persons with Disabilities (PwD) Act, so, even as veterans, they are not entitled to any benefits under this law. While in service, they fall under central administrative control, and after retirement, they are treated as subjects of state policy. Yet they do not automatically receive benefits extended to civilian 'divyangjan' under disability welfare frameworks.
Isn't it ridiculous and differential and step-motherly treatment for those who gave their all to save the sovereignty and freedom of the nation? This duality has long been a matter of grievance among veterans.
And now the meagre amount they get as compensation for losing limbs or various disabilities, through tax exemption on this pension, is pinching the government, and it is looking like a huge cost on the exchequer. Ironically, crores are spent on lawyer fees in various courts to defend cases the government has lost.
There are further disparities in compensation regimes. In the case of a civilian injured in a road accident, a motor accident claims tribunal (MACT) may award compensation in addition to insurance coverage. However, service personnel injured in motor accidents while on duty are not covered under MACT jurisdiction. In certain cases, disabled soldiers have faced discharge without pension, leaving rehabilitation to personal resilience and civil society support.
I, through my non-government organisation (NGO), The Challenging Ones (TCO), was supporting one amputee veteran, who met with an accident, lost his leg, was discharged from services as unfit, and without a pension. He is a shot putter who then competed in the Paralympics.
Against this backdrop, veterans argue that taxing disability pension — which is already modest in comparison to lifetime earning loss and medical needs — appears disproportionate.
Someone should ask FM why such stepmotherly treatment is reserved for the Armed Forces only? We are the first line of defence, and many times we come as saviours, inside the house and the country, as well, when the rest of the machinery, responsible for working in case of man-made or natural disasters, including flushing out kids from left-open wells, fails. And at times, when armed forces are not invited, mishaps like the Noida car sinking happen and young lives are lost.
We also need to question the fiscal logic of targeting this segment, noting that disability pension constitutes a compensatory element rather than a gainful salary. At a time when substantial public expenditure is incurred on litigation and other administrative heads, whether taxing compensation for injury in service is an equitable revenue measure?
The debate is not about willingness to serve. The armed forces community's commitment to national defence is unconditional. However, the present controversy has sharpened a long-standing concern: that dignity, parity and clarity in policy must accompany the rhetoric of respect for soldiers.
As Parliament debates the Budget provisions, the issue has evolved into more than a tax matter. It has become a test of how the State defines its obligation to those who have sustained permanent disability in its defence.
A reconsidered and transparent approach — one that reconciles fiscal objectives with institutional fairness — may ultimately be necessary to restore confidence among veterans and reaffirm the nation’s commitment to its wounded warriors.
One thing is for sure: you treat us well or otherwise, we won't leave our country undefended anyhow, but now, we will also not give up the due dignity and respect, just like that.
(Major DP Singh is a retired officer of the Indian Army. He is a Kargil War veteran and is known as India's first blade runner. After his amputation, he gradually began running with a prosthetic limb and has run in 21 marathons. He is also the first disabled Asian solo skydiver.)
