In the first 'Amrit Kaal Budget', Union Finance Minister Nirmala Sitharaman proposed payment received from Agniveer Corpus Fund be exempted from taxes. The proposal was made by Sitharaman while presenting the Union Budget 2023-24 in Parliament. As per the proposal, the Agniveer Corpus Fund will be given the EEE (Exempt, Exempt, Exempt) status.
The new proposal implies that deduction in the computation of the total income of an Agniveer is “proposed to be allowed to the Agniveer on the contribution made by him or the Central Government to his Seva Nidhi account.”
The first 'exempt' indicates that the investment in question qualifies for a deduction. Therefore, the salary, which is equal to the amount invested, is not taxable. The second 'exempt' implies that tax exemption is mandated on the interest earned during the accumulation phase. Meanwhile, the third ‘E’ implies that the income generated from investment would also be exempted from taxes at the time of withdrawal.
The Ministry of Defence introduced the Agnipath scheme for the enrolment of Agniveers into the Indian Armed Forces in September 2022. The scheme came into force on November 1, 2022. Following the implementation of the scheme, the government set up a non-lapsable dedicated ‘Agniveer Corpus Fund’ in the interest-bearing section of the Public Account head. According to the Defence Ministry, the “Agniveer Corpus Fund” is a fund in which consolidated contributions of all Agniveers and a matching contribution of the government would be held.
Meanwhile, “Seva Nidhi” is the individual package given to an Agniveer from Agniveer Corpus Fund.
As per the Agnipath scheme, Seva Nidhi is exempt from Income Tax. Further, under the Agnipath Scheme, Agniveers are to be provided non-contributory Life Insurance Cover of Rs 48 lakh for the duration of their service in the Indian Armed Forces.