Income tax query

Taxable.

Yes, you can take tax relief u/s. 89(1).

No need to revise old IT returns. Just filling form 10E in current year enables you to get tax relief of old arrears. So, only filling the return of the year in which arrears received.

For more clarifications you can directly approach :: PCDA (Pension)- Pension Call centre, Toll free number : 18001805325

Please keep following intimation ready for submission to the Pension Call Centre executive
1. PPO No.
2. IC No. / Reg. No.
3. Name of Pensioner / Family Pensioner
4. Date of retirement / discharge / death 
5. Brief of points on which information / clarification requires.

Blog: https://indianmilitaryveterans.blogspot.in/2012/07/income-tax-exemption-on-complete.H T M L