ITR Filing: Few Specially Designed Exemptions, Deductions for Defence Personnel

The Minister of State in the Ministry of Finance (Shri Pankaj Chaudhary) has responded to a question raised in the Rajya Sabha (the upper house of India’s Parliament) by Ms. Swati Maliwal regarding the ‘Income Tax Exemptions and Liabilities of Security Personnel.’ These questions were answered on 29/07/2025. Below are listed the questions raised in the Rajya Sabha:

Ms. Swati Maliwal is requesting the Minister of Finance to provide the following information:

(a) The number of serving and retired personnel from the Defence Forces, CAPFs, Paramilitary Forces, and other security agencies who filed Income Tax Returns in the past five years, categorised by force and rank;

(b) Total Income Tax Revenue collected from them during this period, including on salary, pension, allowances, and other income, listed force-wise and year-wise;

(c) The details of current tax exemptions, deductions, and benefits applicable to such personnel;

(d) Whether the Government has analysed how many remain taxable despite the recent Rs. 12 lakh exemption and the findings, force-wise; and

(e) Whether a tax policy review is being considered in recognition of their service?

Let’s break down the answer provided by the Minister of State in the Ministry of Finance (Shri Pankaj Chaudhary).

(a) The Income Tax Department does not collect information in that much detail. In the ITR forms, the nature of employment is only broadly categorised as Central Government, State Government, Public Sector Undertaking (PSU), Pensioners from above, Others and Not Applicable (NA). They do not collect specific details like whether a person is from the Army, BSF, CRPF, CISF, etc., or what rank they held. Therefore, the government does not have the data to answer this question.

(b) Because the ITR forms do not track whether a person belongs to the Defence, CAPF, or paramilitary forces (as stated in part A), the tax department cannot separate and show how much tax was collected from each force. Therefore, they are unable to provide this information too.

(c) The finance ministry has listed various provisions in the Income Tax Act, 1961, that provide tax relief to such personnel. Some of them are explained below:

1. Section 10(10): Exemption for gratuity (a one-time retirement benefit) received, subject to certain limits.
2. Section 10(10A): Exemption for commuted pension (lump sum received instead of regular pension), subject to rules.
3. Section 10(18): Full pension received by people who were awarded gallantry awards like Param Vir Chakra, Maha Vir Chakra, and Vir Chakra is tax-free. Even family pensions received by their families are exempt.
4. Section 10(19): Family pension received by the family of a member of the armed forces or paramilitary forces who died in operational duty is tax-free, subject to certain conditions.

The government clarified that while most of these are available to all taxpayers, a few are specially designed for defence and security personnel, subject to conditions.

(d) Again, since the ITR forms do not track which force a taxpayer belongs to (as stated in part A), the government has not done and cannot do this kind of detailed analysis. Therefore, this data is not available.

(e) The government clearly stated that no such proposal is currently under consideration.