Per Indiana Instructions for Form IT-40, on page 16:

Line 7 – Military Service Deduction (including the National Guard and reserve component of the armed forces)
Important. The military service deduction and the military retirement income and/or survivor’s benefits deduction are reported in two different places.

• You (and/or your spouse, if married filing jointly and both qualify) will report your active, National Guard and/or reserve military service income deduction here.
• You (and/or your spouse, if married filing jointly and both qualify) will report your military retirement income and/or survivor’s benefits deduction on Schedule 2 under line 11, Other Deductions. See the instructions for Military Retirement Income and Survivor’s Benefits Deduction on page 20.

The income on line 1 of Form IT-40 may include military pay from active duty, National Guard, and/or the reserve component of the armed forces (reserve). If it does, you may be eligible to take this deduction.

On page 21:

Military Retirement Income and/or Survivor’s Benefits Deduction 632

The income on line 1 of Form IT-40 may include military pay from active duty, National Guard, and/or the reserve component of new the armed forces (reserve). If it does, you may be eligible to take this deduction

The deduction will be the actual amount of your active duty, National Guard, and/or reserve military income or $5,000, whichever is less. If both you and your spouse received active, National Guard, and/or reserve military income, you may each claim the deduction for a maximum of $10,000 (up to $5,000 each).

Use the worksheet below to figure your deduction.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.