Every year during the Income Tax Return (ITR) filing season, thousands of Ex-Servicemen and disabled Armed Forces pensioners ask one common question:
“Should I include my Disability Pension amount in Gross Salary, Pension Income, or Income from Other Sources while filing my Income Tax Return?”
The confusion has increased after the introduction of the new Income Tax Act, 2025 and the redesigned Income Tax e-Filing Portal.
The simple answer is No.
If you are receiving Disability Pension that is exempt from income tax, you should NOT include it under Gross Salary, Pension Income or Income from Other Sources. Instead, it should only be disclosed under the “Exempt Income” schedule of the ITR.
This article explains the correct method of reporting Disability Pension in ITR, the legal provisions, common mistakes, and practical examples for defence pensioners.
What is Disability Pension?
Disability Pension is granted to Armed Forces personnel who suffer a disability attributable to or aggravated by military service.
Normally, it consists of two components:
- Service Element
- Disability Element
Under SPARSH, both components generally appear in a combined PPO, although legally they continue to form part of Disability Pension.
Is Disability Pension Taxable?
For eligible Armed Forces personnel invalided out due to disability attributable to or aggravated by military service, the entire Disability Pension is exempt from Income Tax.
This includes:
- Service Element
- Disability Element
The exemption continues under the Income-tax Act, 2025 for eligible cases and has been specifically preserved in the new law.
The Most Common ITR Filing Mistake
Many pensioners wrongly enter Disability Pension in:
- Gross Salary
- Pension Income
- Income from Other Sources
Later they try to claim exemption.
This is incorrect and often creates unnecessary tax calculations or confusion.
According to the guidance already published on ESMInfoClub, exempt Disability Pension should not be entered under taxable income heads. It should only be reported in the Exempt Income section of the return.
Should Disability Pension be Included in Gross Salary?
No. Gross Salary is meant for taxable salary or taxable pension. If your monthly pension itself is exempt because it is Disability Pension, it should not form part of Gross Salary. Including it under Salary may:
- Increase Gross Total Income unnecessarily
- Create mismatch in tax computation
- Lead to confusion while claiming exemption
- Cause unnecessary notices in some cases
Therefore, leave it out of Gross Salary.
Should Disability Pension be Shown under Income from Other Sources?
Again, No. Income from Other Sources includes income like:
- Bank Interest
- Fixed Deposit Interest
- Family Pension
- Dividend
- Gifts (where taxable)
Disability Pension is not covered under this head.
It should never be entered there. (Etds)
Where Should Disability Pension be Reported?
The correct place is: Schedule – Exempt Income
Choose the relevant category for Defence Medical Disability Pension and enter the total annual Disability Pension amount. This reporting is mainly for disclosure purposes. It does not become part of taxable income.
Correct ITR Reporting
| Income Type | Where to Report |
| Disability Pension | Exempt Income only |
| Ordinary Service Pension | Gross Salary/Pension |
| Family Pension | Income from Other Sources |
| Interest from Bank FD | Income from Other Sources |
| Salary after Re-employment | Salary |
Example 1
A retired Reemployed Havildar receives:
- Salary from Civil Employment – ₹ 9,00,000
- Disability Pension ₹7,20,000
- FD Interest ₹80,000
Correct reporting:
- Salary from Civil Employment → Gross Salary
- Disability Pension → Exempt Income
- FD Interest → Income from Other Sources
Taxable income = ₹80,000 only (subject to other deductions and applicable provisions).
Example 2
An Ex-Serviceman receives:
- Disability Pension ₹6,60,000
- Salary after joining a PSU ₹9,20,000
Correct reporting:
- Salary → Salary Head
- Disability Pension → Exempt Income
Only the salary and other taxable income will be considered for tax computation.
Example 3
An ordinary military pensioner receives:
- Service Pension ₹5,40,000
- Bank Interest ₹70,000
Since this is ordinary service pension, it should be reported under the Salary/Pension head because it is generally taxable. The exemption discussed in this article applies to eligible Disability Pension cases.
Step-by-Step Process on the Income Tax e-Filing Portal
While filing ITR:
- Login to the Income Tax e-Filing Portal.
- Select the applicable ITR Form.
- Complete Personal Information.
- Fill taxable Salary (if any).
- Fill Interest Income.
- Fill House Property details (if applicable).
- Do not enter Disability Pension under Salary or Other Sources.
- Open Exempt Income.
- Select the Defence Disability Pension category.
- Enter the total annual Disability Pension amount.
- Verify the return and submit it.
What About Impairment Relief?
Impairment Relief introduced under the revised military disability framework is also treated as part of the exempt disability-related benefits in eligible cases, and it has been consistently advised that it should likewise be disclosed under the Exempt Income schedule rather than under taxable income heads.
Documents You Should Keep Ready
Although Disability Pension is exempt, pensioners should preserve:
- Pension Payment Order (PPO)
- SPARSH Pension Details
- Medical Board Proceedings
- Disability Pension Sanction Letter
- Bank Pension Statement
- Relevant PCDA(P) Circulars, if required for clarification
These documents may help in case of any future verification.
Common Mistakes to Avoid
- Reporting Disability Pension as Salary.
- Reporting it under Income from Other Sources.
- Showing both Service Element and Disability Element separately as taxable income.
- Claiming exemption after including the amount in taxable heads.
- Ignoring the Exempt Income schedule altogether.
Frequently Asked Questions (FAQs)
Is Disability Pension fully exempt from Income Tax?
Yes. Eligible Disability Pension received by Armed Forces personnel invalided out due to disability attributable to or aggravated by military service is fully exempt from income tax.
Should I include Disability Pension in Gross Salary?
No. It should not be included in Gross Salary.
Can I show it under Income from Other Sources?
No. Disability Pension should not be reported as “Income from Other Sources.”
Where should I disclose Disability Pension in ITR?
Only under the Exempt Income schedule.
Is Family Pension also exempt?
No. Family Pension is generally taxable under Income from Other Sources, subject to the deductions available under the Income-tax provisions.
I am re-employed after retirement. How should I file my ITR?
Your current employment salary is taxable and should be reported under the Salary head, while eligible Disability Pension should continue to be reported separately under Exempt Income.
Final Words
For disabled defence pensioners, filing the Income Tax Return correctly is just as important as claiming the exemption itself. The law provides complete tax relief on eligible Disability Pension, but incorrect reporting under Gross Salary or Income from Other Sources can create avoidable complications.
The safest and most accurate approach is to exclude the exempt Disability Pension from taxable income heads and disclose the full annual amount only under the “Exempt Income” schedule of the ITR.