Union Budget 2023-24 + FINANCE Bill, 2023

Agnipath Scheme, 2022

The Ministry of Defence has introduced the Agnipath Scheme, 2022 (the Scheme) for enrolment of Agniveers in Indian Armed Forces. It has come into force on 1st November, 2022. In pursuance of the Government's decision to implement the Agnipath Scheme, 2022, the Competent Authority has decided to create a non-lapsable dedicated Agniveer Corpus Fund in the interest-bearing section of the Public Account head. The package given to an Agniveer from Agniveer Corpus Fund is called as ‘Seva Nidhi’.

2. In the Scheme, the Agniveer Corpus Fund is defined as a Fund in which consolidated contributions of all the Agniveers and matching contributions of the Government along with interest on these contributions would be held in their respective accounts. The scheme will be administered and the Fund will be maintained under the aegis of Ministry of Defence (MoD) with the following features –

(i) Each Agniveer is to contribute 30% of his monthly customized Agniveer Package to the individual’s Agniveer Corpus Fund. Further the Government will also contribute a matching amount to the ‘Agniveer Corpus Fund’. The Government will also pay to the subscriber interest as approved from time to time on the contributions standing in his account.

(ii) On completion of the engagement period of four years, Agniveers will be paid one time ‘Seva Nidhi’ package, which shall comprise of their contribution including interest thereon and matching contribution from the Government equal to the accumulated amount of their contribution including interest.

3. In order to allow deduction from the computation of total income of Agniveer, any contribution made by him or the Central Government to his Agniveer Corpus Fund account and to exempt from tax any payment received by Agniveer or his nominee, from the Agniveer Corpus Fund, it is proposed to make the following amendments:

(i) It is proposed to insert a new clause (12C) in section 10 of the Act to provide that any payment received from the Agniveer Corpus Fund by a person enrolled under the Agnipath Scheme, 2022, or the nominee of such person shall be exempted from income tax.

(ii) It is further proposed to insert a new section 80CCH to the Act to provide that an assessee, being an individual enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund on or after the 1st day of November, 2022, shall be allowed a deduction of the whole of the amount deposited by him and also the amount contributed by the Central Government to his account in the Agniveer Corpus Fund, from his total income.

(iii) For the purposes of this proposed clause (12C) of section 10 and section 80CCH, it is proposed to define ‘Agnipath scheme’ as a scheme for the enrolment in Indian Armed Forces introduced by the Central Government, and ‘Agniveer Corpus Fund’ as a fund defined in para 2(c) of Agnipath Scheme notified by the Central Government.

(iv) It is also proposed to insert a new sub-clause in clause (1) of section 17 of the Act so as to provide that the contribution made by the Central Government in the previous year, to the Agniveer Corpus Fund account of an individual enrolled in the Agnipath Scheme referred to in section 80CCH shall be considered as salary of that individual. A corresponding deduction of the same has been provided as mentioned above.

(v) Further, it is proposed to provide that in the new tax regime of section 115BAC an individual enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund shall get a deduction of the government contribution to his Seva Nidhi [sub-section (2) of section 80CCH].

4. These amendments will take effect from the 1st day of April, 2023 and will apply in relation to assessment year 2023-24 and subsequent assessment years.

[Clauses 5, 10, 39, 50]

 

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Full Text:

Union Budget 2023-24 + FINANCE Bill, 2023

Agniveer Corpus Fund tax exemption: contributions and Seva Nidhi receipts exempt, government contribution treated as salary with deduction. The Agnipath Scheme creates a non-lapsable Agniveer Corpus Fund holding Agniveer contributions, matching Government contributions and interest; Seva Nidhi is the one-time terminal package payable on completion of engagement. The Finance Bill proposes to exempt Seva Nidhi receipts from income tax and to permit deduction from total income of both the Agniveer's deposits and the Government's matching contributions, while treating the Government contribution as salary with a corresponding deduction and extending a similar deduction in the new tax regime.