Soldier and Income Tax

Income Tax and the Soldier

BJP in its Manifesto for the Parliamentary Elections 2009 has promised to exempt the Armed Forces and Para-militaries from paying income tax, if the party is voted to power. This has ignited a debate in the informed circles about the legality and ethics of the promise. This paper attempts to examine the rationale of income tax and its applicability on soldiers on the basis of ethics.

Income Tax (IT) is defines by Encyclopedia Britannica as `Levy imposed by public authority on the incomes of persons or corporations within its jurisdiction.’ It was initially introduced in Britain to finance Napoleonic Wars from the income of private enterprise who till then did not contributed to the National Endeavour in a legally defined manner. Ethics of the personal income taxation is based on the premise that one’s income is the best single index of one’s ability to contribute to the support of the country and is scaled as per their paying capacity which differ as the financial circumstances differ.

Both the history and principle on which the IT is based are essentially meant to harness the income which accrues from private enterprise in a capitalistic economy. Hence it follows that those in the service of state should not pay income tax because their pay is in any case decided by the government and they are paid only for their labour (service rendered). So legally and ethically speaking if a civil servant was being paid only for his labour, he would not be liable to pay IT. However the civil servant in India is not only paid for is labour but also gets certain benefits which fall under the category of welfare. `An Indian Civil Servant receives free health care, housing facilities, transport fares, etc. Also, there is the added assurance of job security since one is employed by the government see here. RK Puram is civil servant haven in Delhi. A civil servant posted to North East can retain a house (or get HRA) in Delhi to compensate for the hardship. There are many more such benefits and last but not the least a pension scheme. These benefits are far in excess of social safety net available to common citizen. This is the ethical basis for levying IT on civil servant. I had no intention of showing civil servant in poor light but sad fact is that in India soldier’s rights are hyphenated to privilege of civil servant.

Now let us take the case of a soldier. But, someone would say, the soldier is also getting benefits like housing, rations and military service pay. That is true. More important is to understand the reason for a particular `facility’. The soldiers are housed in military bases, not so much as a welfare measure but to ensure their availability for training and employment. They are given rations so as to ensure high level of physical fitness. This is akin to players being given incentives and diet money..

In India pay of soldier is decided by drawing some kind of comparison with other government employees. While the norms for deciding this comparability are not known but successive pay commissions have taken a police constable as nearest equal of soldier while deciding his (soldier’s) pay. This comparison is totally odious because the conditions of service faced by a soldier are completely alien to other civil services including police and I dare say, PMF. Let me highlight just four facts. First the average retirement age of soldier is 37 years, while that of police/ PMF constable retires at 58 years of age. On account of having served 21 years longer than the soldier, the police constable earns Rs. 28 Lacs more. The disparity becomes even more when we take lifetime earnings of the two. Second, the rules governing conduct of a soldier are infinitely stricter than policemen. Third, task profile of a soldier, in terms of its intensity and quality, is of entirely different order as compared to Police/PMF constable even in same area. Just study counter terrorist operations in J&K or NE and 26/11 in Mumbai where the SAG (totally manned by the Army men) operated at a different level then the local police or the profile of anti-naxal operations. Fourthly, the soldier faces maximum turbulence in life on account of having to change career more than once and for being further away (psychologically) from his native place. They are given military service pay to `partially’ compensate for vagaries of military service. Hence it is but fair that IT must not be levied on the soldier’s income, especially when he is employed on combat duties. That is while he is serving in field areas and not while he is posted to `peace’ areas or performing essentially sheltered duties in field areas. This step would also make the army and especially combat arms a wee bit more attractive for the right material.

Accepting legal and ethical validity of exempting the soldier from tax many a country have exempted their soldiers from paying taxes. Just to cite a few examples. In the USA the soldiers are exempt from federal taxes while serving in combat zone see here. In the USA till as late as year 1922 all incomes of a soldier were exempt from tax and in continuation of the legacy all soldiers who are posted to units located within the State of Minnesota are exempt from all state taxes see here . Similarly UK government pays a bonus to all soldiers deployed for combat to compensate for the income tax paid by the soldier see here .

To me fear of resentment amongst the civil populace seems quite misplaced because the people at large have never opposed compensatory steps to reduce the hardships of army life.