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September 9, 2020

Know all tax benefits for Person with disability in India

by shivam jaiswal in Income Tax

Know all tax benefits for Person with disability in India

A disability is defined as a condition or function judged to be significantly impaired relative to the usual standard of an individual or group. The term is used to refer to individual functioning, including physical impairment, sensory impairment, cognitive impairment, intellectual impairment mental illness, and various types of chronic disease.

The Income Tax law of India provides tax benefits to individuals if either they or any of their family members are suffering from certain disabilities. Let us learn the same in detail in this article.

Deduction under Section 80U

Section 80U of the Income Tax Act, 1961 provides for tax deduction benefit to individual taxpayers suffering from a disability. In order to claim tax deduction under section 80U, the individual must be certified as a person with a disability by appropriate medical authority.

Who can claim deduction under Section 80U?

Individuals suffering from any of the following ailments with minimum 40% impairment will be considered as disabled to claim deduction under Section 80U:

  • Blindness
  • Low vision
  • Leprosy-cured
  • Hearing impairment
  • Loco motor disability
  • Mental retardation
  • Mental illness

The section also provides a definition for a severe disability which refers to a condition where the disability is 80% or more. Severe disability also includes multiple disabilities, autism and cerebral palsy.

What is the limit of deduction under Section 80U?

  • If a person is suffering from at least 40% disability, he/she can claim a tax deduction upto Rs.75,000
  • Person with Severe Disability: If a person is suffering from severe disability i.e suffering 80% disability (either from one or multiple ailments) can claim a tax deduction upto Rs. 1,25,000 lakh

Deduction under Section 80DD

Deduction under section 80DD of the income tax act is allowed to Resident Individuals or HUFs for a dependant-who suffering from a disability and is wholly dependent on the individual (or HUF) for the medical treatment, support and maintenance.

Who is eligible to claim deduction under Section 80DD?

Disability for Section 80DD is defined under section 2(i) by the “Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995” as well as disabilities includes in clauses (a), (c) and (h) of section 2 of National Trust for welfare of Person with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999. This includes the following disabilities:

  • Cognitive or severe mental disabilities
  • Low vision
  • Blindness
  • Leprosy-cured
  • Hearing impairment
  • Locomotor disability
  • Mental illness
  • Autism
  • Cerebral palsy
  • Or Multiple disabilities

The person must not suffer less than 40% of any of the above disabilities. When it comes to severe disability 80% or above, one or more of the mentioned illnesses or disabilities is considered.

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What is the limit of deduction under Section 80DD?

  • A dependant person with disability is one who has at least 40% of any of the specified disability – The family member who takes care of the medical charges of the dependant person with disability can claim tax deduction of up to Rs. 75,000.
  • A dependant person with severe disability is one who has at least 80% of any disability – The family member handling the medical expenses of dependant person with severe disability can claim tax deduction of up to Rs. 1,25,000.

What is the difference between section 80DD and section 80U?

  • Although both the sections provide income tax deduction on the grounds of disability, the beneficiaries under the respective sections are different.
  • Under section 80U, individual suffering from a disability can claim for tax deductions for self only.
  • While under Section 80DD, dependant family members of the individual suffering from the disability can claim the tax deduction. Here, dependant family members include spouse, children, parents, siblings of the disabled person.

Exemption from payment of Profession Tax under Section 27A of Profession Tax Act (Maharashtra State)

Profession tax is the tax levied and collected by the state governments in India. It is a indirect tax. A person earning an income from salary or anyone practicing a profession such as chartered accountant, company secretary, lawyer, doctor etc. are required to pay this professional tax. Different states have different rates and methods of collection. In India, profession tax is imposed every month.

Nothing contained in The Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975 shall apply to any person suffering from a permanent physical disability (including blindness), being a permanent physical disability specified in the rules made in this behalf by the State Government, which is certified by a physician, a surgeon or an oculist, as the case may be, working in a Government Hospital and which has the effect of reducing considerably such individual’s capacity for normal work or engaging in a gainful employment or occupations.

To claim exemption, individual shall forward the certificate to employer who will produce the aforesaid certificate before the prescribed authority in respect of the first assessment year for which he claims deduction under the Act.

Transport allowance Under Section 10(14) of the Income Tax Act

Transport Allowance of Rs. 3,200 per month is granted to an employee, who is blind or deaf and dumb or orthopedically handicapped with disability of lower extremities granted to meet expenditure for the purpose of commuting between place of residence and place of duty

No Clubbing of Income of minor child

The Indian tax law has special provisions related to clubbing of income earned by the minor child under Section 64(1A) of the Income Tax Act. Till the minor has not reached the age of 18 years, his income will be assessed/ clubbed with the income of the father or mother of such child, whoever has a higher income. However, income earned by the minor child suffering from a disability specified in Section 80U of Income Tax Act will not be clubbed with his/ her parent.

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