Many of the veterans -- Nepalese soldiers who served with the British army -- had invested high hopes in the parliamentary inquiry launched last year into decades of alleged discrimination at the hands of the British government.
But the report proved a bitter disappointment for the veterans and hundreds gathered outside the Houses of Parliament in protest, holding up placards saying: "Price of loyalty -- injustice" and "Gurkha pension rights".
"It has taken over 20 years of campaigning to get to this stage, and we thought this would be an opportunity to put an end to the Gurkha grievances once and for all," said Deepak Maskey, a spokesman for the Gurkha Satyagraha campaign.
One veteran, Gyanraj Rai, said he might have to resume a two-week hunger strike he carried out last year, which only ended with the launch of the inquiry by the All-Party Parliamentary Group (APPG) on Gurkha rights.
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"We want the value of our blood and tears. We want to be treated as our British counterparts," the 56-year-old, who served 19 years with the British army, told AFP.
Afterwards many of the protesters, the men wearing suits and the women wrapped in brightly coloured scarves, took their message to Prime Minister David Cameron with a demonstration outside Downing Street.
But it is only since 2007 that they have had the same pay and conditions as British soldiers, and campaigners have been demanding rights for veterans and their families, many of whom they say have been left in poverty.
One of the key issues was the income of almost 21,000 veterans on the Gurkha Pension Scheme, but the parliamentary report did not make any recommendations, citing ongoing legal action.
This was "racism pure and simple", the lawmakers said, saying any Gurkha who wished to pursue legal action should be given British state funds to fight their case.
APPG chairwoman Jackie Doyle-Price, a lawmaker with Cameron's Conservative party, acknowledged the Gurkhas' disappointment at her report.
She stressed that her group only had the power to advise, not compel, the government, but said it was only a "staging post on the journey -- it's not the end of it".