Understanding Tax Exemption Under Section 10(18) of the Income Tax Act, 1961
Section 10(18) of the Income Tax Act, 1961, offers significant tax relief to certain individuals and their families, recognizing their invaluable contributions to the nation. This provision primarily addresses the pension income of individuals who have been recipients of specific gallantry awards.
Key Features of Section 10(18)
1. Exempted Income:
The section exempts from tax any pension received by an individual who has served in the Central Government or State Government and has been awarded “Param Vir Chakra”, “Maha Vir Chakra”, “Vir Chakra”, or any other gallantry award specified by the Central Government in the Official Gazette.
2. Family Pension
Family pension received by any member of the family of an individual awarded the aforementioned gallantry awards is also exempt from tax. This provision ensures that the financial benefits extended to the families of gallant individuals are maximized.
3. Definition of Family:
The term “family” for the purposes of this exemption includes the spouse, children, and dependent parents of the awardee. This definition is consistent with the Explanation to clause (5) of Section 10.
Case Laws Highlighting Section 10(18) Benefits
1. UOI v. Lakshmi Bai (1994) 208 ITR 559 (SC):
This landmark case reinforced the exemption eligibility for pensions received by the widows and other eligible family members of deceased armed forces personnel, emphasizing the government’s recognition of their sacrifices.
2. CIT v. Subhash Chand (2016) 383 ITR 140 (Del):
The Delhi High Court clarified that the exemption under Section 10(18) applies to pensions received in respect of personnel awarded posthumous gallantry awards, ensuring comprehensive coverage.
3. ACIT v. Suresh Kumar (2012) 52 SOT 482 (Chd):
This case delved into the interpretation of ‘pension’, affirming that the family pension received by dependents of deceased armed forces personnel awarded specified gallantry awards is exempt from tax.
Practical Implications
For individuals and families eligible under Section 10(18), maintaining proper documentation of the awards and circumstances under which the pensions are received is crucial. Proper documentation facilitates the smooth processing of exemption claims during tax assessments, ensuring that beneficiaries receive their full entitlements without undue delays.
FAQ on Section 10(18) of the Income Tax Act, 1961
Q1: Who is eligible for the tax exemption under Section 10(18)?
Individuals who have served in the Central or State Government and have been awarded “Param Vir Chakra”, “Maha Vir Chakra”, “Vir Chakra”, or any other gallantry award specified by the Central Government in the Official Gazette are eligible for the tax exemption.
Q2: Does the exemption apply to family members of the awardees?
Yes, the exemption also applies to the family pension received by any member of the family of the awardee, including the spouse, children, and dependent parents.
Q3: What type of income is exempt under Section 10(18)?
Both the pension received by the awardee and the family pension received by the awardee’s family members are exempt from tax under Section 10(18).
Q4: Are there any specific gallantry awards mentioned for this exemption?
Yes, the specific gallantry awards mentioned include “Param Vir Chakra”, “Maha Vir Chakra”, and “Vir Chakra”. The Central Government may also specify other gallantry awards by notification in the Official Gazette.
Q5: How should one document the exemption claim under Section 10(18)?
Proper documentation includes maintaining records of the gallantry awards and the circumstances under which the pensions are received. This ensures smooth processing of exemption claims during tax assessments.
Q6: Are posthumous gallantry awards covered under this exemption?
Yes, posthumous gallantry awards are covered under this exemption, as clarified by relevant case laws, ensuring comprehensive benefits to the families of deceased personnel.
Conclusion
Section 10(18) of the Income Tax Act, 1961, is a testament to the nation’s respect and gratitude towards its gallant heroes and their families. By providing tax exemptions on their pension and family pension, the government ensures that the financial support extended to these families is maximized, recognizing their invaluable contribution to the country’s security and safety.
For more detailed information on tax exemptions and other related provisions, visit SmartTaxSaver, your go-to resource for all tax-related queries and guidance.2
