Squadron Leader Priya Jairaj, a doctor, was the second female Indian Air Force officer after Flying Officer Anjali Gupta to face such disciplinary action.
"Air Force headquarters have confirmed the punishment to Squadron Leader Jairaj," T Venugopal, Air Officer Commanding of 12 Wing Air Force Station, told PTI in Chandigarh on Tuesday.
Jairaj faced charges under various provisions of the Air Force Act and the Indian Penal Code for abetting the suicide of Sergeant Srinivasan when she was posted at Chandigarh.
Srinivasan, 32, committed suicide in September 2005 by hanging himself from a tree near the air force station in Chandigarh.
Police recovered a suicide note in which Srinivasan blamed Jairaj, his superior, for harassment, officials said. Police registered a case and booked Jairaj on charges of abetment of suicide.
The IAF initiated its own investigation and a court of inquiry was ordered by the Western Air Command. This inquiry held Jairaj blameworthy for certain acts that allegedly led Srinivasan committing suicide.
Jairaj's general court martial began in the last week of August and was completed in September, he said. The court martial, held at the air force station here, was presided over by the Thoise air force station commander, Group Captain P Jaiswal.
Anjali Gupta was dismissed from service in February for indiscipline and financial irregularities.