According to the legislation, which parliament passed this month, anyone who served in the military from 1943 to 1990 and acted against national interest -- both those currently alive and dead -- may be stripped of his or her rank.
Duda said he blocked the law because it does not offer any legal recourse to the individuals in question, nor if they have already died, to their descendents.
He added that the legislation applied to all former members of the communist party's infamous WRON council, which was responsible for imposing martial law in Poland in 1981, even though not everyone played an active role.
Certain members, like astronaut and General Miroslaw Hermaszewski, were mainly recruited to improve the council's image.
"From an ethical point of view, this is a serious lapse in the law," Duda told reporters, adding that he was sending the legislation back to parliament.
Calling his veto a "difficult decision," Duda added that he generally agreed with the idea behind the legislation but could not accept it as is.
Notable targets of the law include the late communist leader General Wojciech Jaruzelski and his interior minister General Czeslaw Kiszczak, who has also since died.
The pair were architects of the 1981 martial law edict, which sought to counter a wave of strikes and protests, led by the free trade union Solidarity, that threatened the regime.
Running to 1983, the period was marked by the arrests and prosecution of thousands, as well as the death of striking coal miners by paramilitary police.
The two generals eventually surrendered power under the so-called round table agreement with Solidarity in 1989 -- an act that helped trigger the downfall of communist regimes across eastern Europe that year.
They retired from public life. They were prosecuted but were never punished for the regime's crimes.
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