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# Tax Exemptions for Defence Personnel in India: A Comprehensive Guide
Defence personnel in India, encompassing members of the Army, Navy, Air Force, and paramilitary forces, are entitled to various tax exemptions and deductions under the Income Tax Act, 1961. These benefits acknowledge their service in challenging conditions and help alleviate financial burdens. This guide details the key provisions for Assessment Year (AY) 2025-26 and beyond, focusing on exemptions under Section 10, other special benefits, and deductions under Chapter VI-A. Note that personnel can opt for the old tax regime to avail most exemptions, as the new regime under Section 115BAC removes many of these. Always consult the latest CBDT circulars or a tax advisor, as rules may update with budgets.
## Exemptions Under Section 10 of the Income Tax Act
Section 10 exempts certain incomes from total income computation. For defence personnel, this includes allowances for operational duties, pensions, and awards.
### Section 10(14): Special Allowances
This subsection exempts allowances for meeting duty-related expenses. Rule 2BB specifies limits for prescribed allowances under Section 10(14)(ii). Below is a detailed list:
| Allowance Type | Subsection/Rule | Exemption Limit | Conditions |
|---------------|-----------------|-----------------|------------|
| Counter Insurgency Allowance | Section 10(14)(ii); Rule 2BB | Up to ₹3,900 per month for JCOs/Other Ranks; Up to ₹4,200 for Officers | For service in insurgency areas; not claimable with border allowance. |
| High Altitude Allowance | Section 10(14)(ii); Rule 2BB | Category I (9,000-15,000 ft): ₹1,060 per month; Category II (>15,000 ft): ₹1,600 per month | For high-altitude postings; location-specific. |
| Highly Active Field Area Allowance | Section 10(14)(ii); Rule 2BB | Up to ₹4,200 per month | For intensely active field areas; applicable to officers and JCOs. |
| Island Duty Allowance | Section 10(14)(ii); Rule 2BB | Up to ₹3,250 per month | For Andaman & Nicobar or Lakshadweep postings. |
| Compensatory Field Area Allowance | Section 10(14)(ii); Rule 2BB | Up to ₹2,600 per month | For specified areas in Arunachal Pradesh, Manipur, Sikkim, Himachal Pradesh, Uttar Pradesh, Jammu & Kashmir. |
| Compensatory Modified Field Area Allowance | Section 10(14)(ii); Rule 2BB | Up to ₹1,000 per month | For areas in Punjab, Rajasthan, Haryana, Himachal Pradesh, Northeast states, Jammu & Kashmir, Uttar Pradesh. |
| Remote Locality/Border Area/Difficult/Disturbed Area Allowance | Section 10(14)(ii); Rule 2BB | ₹200 to ₹1,300 per month | For designated remote or disturbed areas like Northeast, Himachal Pradesh, Jammu & Kashmir, Uttarakhand. |
| Special Compensatory (Hilly Areas/High Altitude/Snow Bound/Avalanche) Allowance | Section 10(14)(ii); Rule 2BB | ₹300 to ₹800 per month; Up to ₹7,000 for Siachen (note: actual Siachen allowance may be higher under revised rates, e.g., ₹42,500 pm as per recent updates) | For hilly or avalanche-prone areas in Northeast, Jammu & Kashmir, Himachal Pradesh. |
| Uniform/Kit Maintenance Allowance | Section 10(14)(i); Rule 2BB(1)(f) | Fully exempt if spent on uniforms | For official purposes; excess taxable. |
| Transport Allowance | Section 10(14)(ii) | Up to ₹3,200 per month for disabled personnel | For commuting; higher for blind or orthopaedically handicapped. |
| Children Education Allowance | Section 10(14)(ii); Rule 2BB | ₹100 per child per month (max 2 children) | For education expenses. |
| Hostel Expenditure Allowance | Section 10(14)(ii); Rule 2BB | ₹300 per child per month (max 2 children) | For hostel expenses. |
### Other Exemptions Under Section 10
- **Section 10(7)**: Foreign allowances (e.g., Bhutan Compensatory Allowance, Outfit Allowance for embassy postings). Fully exempt for government services abroad.
- **Section 10(10)**: Death-cum-retirement gratuity. Fully exempt up to ₹20 lakh.
- **Section 10(10AA)**: Leave encashment on retirement. Fully exempt for defence personnel.
- **Section 10(10C)**: Voluntary retirement compensation. Exempt up to ₹5 lakh.
- **Section 10(11)**: Payments from Provident Fund. Fully exempt.
- **Section 10(18)**: Gallantry awards and related pensions (e.g., Param Vir Chakra, Ashok Chakra). Fully exempt, including family pensions.
- **Section 10(19)**: Family pension for dependents of deceased armed forces personnel. Fully exempt if death occurred in line of duty.
- **Section 10(23AA)**: Income from regimental or non-public funds for armed forces welfare. Fully exempt.
## Other Special Exemptions and Benefits
- **Disability Pension**: Fully exempt under Section 10(14) if attributable to service, per CBDT circulars.
- **Ex-Gratia Payments**: Fully exempt for families in case of death in service.
- **Perquisites for Official Purposes**: Exempt, including rations, accommodation.
- **Standard Deduction on Salary/Pension**: ₹50,000 (increased to ₹75,000 in new regime from AY 2025-26, but old regime retains ₹50,000; confirm applicability).
## Deductions Under Chapter VI-A
These reduce taxable income in the old regime:
- **Section 80C**: Up to ₹1.5 lakh for investments like AFPP (Armed Forces Provident Fund), AGIF (Army Group Insurance Fund), LIC, NSC, tuition fees, home loan principal.
- **Section 80CCH**: Full deduction for contributions to Agniveer Corpus Fund (individual and government shares) under Agnipath Scheme.
- **Section 80D**: Up to ₹25,000 for health insurance (self/family); ₹50,000 for senior citizens/parents.
- **Section 80E**: Full interest on education loans for 8 years.
- **Section 80G**: Deductions for donations, including to ex-servicemen funds.
- **Section 80TTB**: Up to ₹50,000 on interest for senior citizens (60+).
- **Home Loan Interest (Section 24(b))**: Up to ₹2 lakh.
## Conclusion
These tax benefits provide substantial relief to defence personnel and their families. Opting for the old regime maximizes exemptions, especially on allowances and pensions. With recent updates like revised standard deductions and new regime changes, staying informed is crucial. Refer to the Income Tax portal or professional advice for filing.
