Chavan, 24, who was admitted to the psychiatry ward in Military Hospital at Kirkee, has written a letter to his seniors requesting them to relieve him from service, saying he is "disturbed".
The soldier, from 37 Rashtriya Rifles, had gone missing on September 29, 2016 after he "inadvertently" crossed the LoC, following which the Pakistan Army had taken him into custody. He was handed over to the Indian Army four months later.
After returning, Chavan, who hails from Dhule district, faced a sentence for leaving his post without informing his seniors and was later transferred to the Armed Corps Centre at Ahmednagar in Maharashtra.
Chavan, who was discharged from the hospital yesterday, said he was seeking retirement as he was "disturbed after whatever happened to him in the last two years".
"I have written to my seniors and requested them to prematurely discharge me from my duties and give me pension," he told.
Chavan said the Army provided him all possible help and he had no complaints. A Southern Command officer, however, said they have not received any letter from Chavan.
"We are yet to know the fact as no letter from him has been received so far," the officer said.
Indian Army Special Forces had conducted a Surgical Strikes along LoC on September 29, 2016, and had caused severe damage on Pakistani Terrorist outfit Lashkar-e-Taiba(LeT).