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May 2, 2020

Person with Disability which slab rate to use – Old or New for FY 2020-21 know all benefits in Income Tax

Person with Disability which slab rate to use – Old or New for FY 2020-21 know all benefits and Deduction in Income Tax in India

The Finance Act 2020 has provide options to all Individuals to select option to chose to Slab Rates. There are two slabs rates Old and New. Old Rates are same as for last Financial Year 2018-19 and allows you to claim deduction in Section 80U, Section 80DD, Section 80DDB, Section 10(14) Transport Allowance, 80C, 80D, etc. The New Slab Rates do not allow Person with Disability to Claim 80U, 80DD, etc deductions.

It would be wise for all Person with Disability who earn more than Rs 5 Lakh in Financial Year to plan your taxes in advance and know which method will be beneficial to them

As per Section 80U every Person with Disability is eligible for deduction upto Rs Rs 75,000 /- (in case Disability is 40% or more) and Rs 1,25,000/- for Person with Severe Disability (80% of one or more disabilities). Person claiming should have disability certificate.

New Income Tax Rates for FY 2020-21

If the Person with Disability opts for new tax regime then has to pay tax as per the below slab rates:

SITotal IncomeRate of Tax
1Up to Rs. 2,50,000Nil
2From Rs. 2,50,001 to Rs. 5,00,0005 per cent.
3From Rs. 5,00,001 to Rs. 7,50,00010 per cent.
4From Rs. 7,50,001 to Rs. 10,00,00015 per cent.
5From Rs. 10,00,001 to Rs. 12,50,00020 per cent.
6From Rs. 12,50,001 to Rs. 15,00,00025 per cent.
7Above Rs. 15,00,00030 per cent.

If the Person with Disability opts for paying tax as per the new slabs rates then he must forgo the below listed deductions and exemptions

Sr NoDeduction / ExemptionAmount
1Deduction for Person with Disability – Section 80UDisability up to 40%= 75,000 or Severe more than 80% = Rs. 1,25,000
2Deduction with respect to medical treatment of handicapped relative u/s 80DDMaximum deduction Normal disability =75,000 and for Severe disability = 1,25,000
3Deduction with respect to treatment of specified disease u/s 80DDBMaximum deduction Lower of Actual expenses or Maximum Rs. 40000 for other and 100000 for senior citizen
4 Transport Allowance in Section 10(14)Up to 3200 *

The transport allowance may be exempt for person with disability in as in Finance Bill it is stated “(other than those as may be prescribed for this purpose)”

We have covered deduction and expenses not allowed only for Person with Disability. To know Entire List of 50 Plus Deduction Not Allowed Click Here

Slab rates as per the old income tax regime:

If the Person with Disability opts for old tax regime then has to pay tax as per below slab rates:

SITotal IncomeRate of Tax
1Up to Rs. 2,50,000Nil
2From Rs. 2,50,001 to Rs. 5,00,0005 per cent.
3From Rs. 5,00,001 to Rs. 10,00,00020 per cent.
4Above Rs. Rs. 10,00,00030 per cent.

Person with Disability can Claim all Deductions if he chose Old Rates

Let us Understand by Example

Mr. X has total income of Rs. 10 lakhs for the previous year 2020-21. Mr. X is a handicapped individual.

Let us calculate total income tax liability of Mr. X under two scenarios where he disability is more than 40% but up to 80% and more than 80% and Where he pays income tax as per OLD rates

ParticularsDisability more than 40% but up to 80%Disability more than 80%
Total Income10,00,00010,00,000
Less: Deduction u/s 80U(75,000)(1,25,000)
Net Total Income9,25,0008,75,000
Tax on total income as per old slab rates97,50087,500
Health and Education cess at 4%3,9003,500
Total tax liability1,01,40091,000

Let us calculate total income tax liability of Mr. X under two scenarios where he disability is more than 40% but up to 80% and more than 80% and Where he pays income tax as per NEW rates

The assessee will not get the benefit of deduction under section 80U if he opts for new tax regime and pays tax as per the New slab rates.

ParticularsDisability more than 40% but up to 80%Disability more than 80%
Net Total Income10,00,00010,00,000
Less: Deduction u/s 80U0 – Not Allowed0 – Not Allowed
Net Total Income10,00,00010,00,000
Tax on total income as per new slab rates7500075000
Health and Education cess at 4%3,0003,000
Total tax liability78,00078,000

The Conclusion is Mr X if he is opting for new rates (without 80U benefit) then his tax liability is lower then in old rates

The Income above Rs 15 Lakhs have same ate to Tax in both New and Old Method Let us calculate the break-even income of Mr. X consider under both old and new regime where X is having total income of Rs. 15 lakhs:

Assuming than Mr. X is having disability of more than 80%

ParticularsIncome Tax liability under old RegimeIncome Tax liability under New regime
Total Income15,00,00015,00,000
Less: Deduction u/s 80U(1,25,000)0
Net Total Income13,75,00015,00,000
Tax on total income as per old slab rates2,25,0001,87,500
Health and Education cess at 4%9,0007,500
Total tax liability2,34,0001,95,000
Tax Saving 39.000

The Conclusion is Mr X if he is opting for new rates (without 80U benefit) then his tax liability is lower then in old rates. Every Person with disability has to calculate tax in both Old and New rates and Exclude all deduction that are not allowed from April 2020 FY 2020-21

know all Income Tax benefits available to Person With Disability in India

1) Section 80U – under the Income Tax Act: Deduction with respect to disabled individual

Who can claim the benefit: Individual who is resident during previous year and is certified by Medical Authority to be a person with Disability.

Deduction allowed: In case of Person with Disability (at least 40%) Rs 75,000 /- is allowed. In case of Person with Severe Disability (80% of one or more disabilities) Rs. 1,25,000/- is allowed.

Other Points to be noted:

  1. In case where the condition of disability requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any assessment year relating to any previous year beginning after the expiry of the previous year during which the aforesaid certificate of disability had expired, unless a new certificate is obtained from the medical authority in the form and manner, as may be prescribed, and a copy thereof is furnished along with the return of income
  2. The assessee claiming deduction under section 80U must possess a copy of the certificate issued by the medical authority in the prescribed form and manner i.e. in Form 10-IA. The certificate possesses the details of the dependent relative and contains the percentage of disability the person is suffering from 
  3. The assessee will not be eligible for deduction under section 80U where the relative of assessee has already claimed deduction under section 80DD for himself in his return of income.

2) Section 80DD – Deduction in respect of maintenance including medical treatment of a dependent relative:

Section 80DD is deduction in respect of medical treatment and maintenance of handicapped dependent relative. It is applicable to resident individual or HUF who is incurring expense on differently abled dependent relative. The other conditions that the assessee is required to fulfill in order to claim the deduction is as follows:

  1. The deduction is allowed in case assessee incurs medical expense on dependent relative and not on the taxpayer himself
  2. Dependent in case of an individual taxpayer means spouse, children, parents, brothers & sisters of the taxpayer. In case of a HUF means a member of the HUF.
  3. The assessee has actually has incurred expenses for medical treatment (including nursing), training & rehabilitation of the differently abled dependent or the assessee has incurred expenses for insurance related to maintenance of the dependent relative
  4. The taxpayer will not be eligible for deduction under section 80DD in where the dependent relative has already claimed deduction under section 80U for himself in his return of income.
  5. The assessee claiming deduction under section 80DD must possess a copy of the certificate issued by the medical authority in the prescribed form and manner i.e. in Form 10-IA. The certificate possesses the details of the dependent relative and contains the percentage of disability the person is suffering from.
  6. The assessee will not get the deduction in case the disability is less than 40%
  7. In case where the condition of disability requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any assessment year relating to any previous year beginning after the expiry of the previous year during which the aforesaid certificate of disability had expired, unless a new certificate is obtained from the medical authority in the form and manner, as may be prescribed, and a copy thereof is furnished along with the return of income.

Deduction allowed:

The assessee if liable for flat deduction in case:

  1. The assessee will get no deduction disability less than or up to 40%
  2. The assessee will get deduction of Rs. 75,000 where disability is more than 40% and less than 80%
  3. The assessee will get deduction of Rs. 1,25,000 where disability is more than 80%

3) Section 80DDB: Deduction in respect of medical treatment, etc. for special disease.

Section 80DDB is deduction in respect of medical treatment for specified disease. It is applicable to resident individual or HUF who has paid any amount for the medical treatment of such disease or ailment, for himself or dependent or any member of HUF. The following are the conditions for availing deductions under section 80DDB:

  1. The deduction is allowed where the assessee is a resident individual as well as HUF
  2. In case the assessee is a non-resident than he cannot avail the deduction
  3. The expense should be incurred for the medical treatment of the assessee himself or dependent husband/wife, children, parents, brothers and sisters of the taxpayer
  4. In case the assessee is a HUF then it can claim deduction for the expenses incurred in the treatment of any member of HUF.
  5. In case of HUF the deduction allowed in the return of HUF cannot be claimed by any member of the HUF.
  6. Dependent includes a spouse, son/daughter (any child), parents, brother/sister (siblings) of the assessee, in case of HUF any member of the HUF.

Deduction allowed:

Rs 40,000/- deduction shall be allowed or amount actually paid, whichever is less

In case the expense is incurred for a senior citizen (65 years or more), than deduction of Rs. 1,00,000 or amount actually paid, whichever is less shall be allowed The above can be summarized as below:

AgeAmount of Deduction
Less than 65 yearsRs. 40,000
More than 65 yearsRs. 1,00,000

What are the disease covered under section 80DDB?

For the purposes of this section the following shall be the eligible diseases or ailments:

  1. Neurological Diseases where the disability level has been certified to be of 40% and above.
    • Dementia;
    • Dystonia Musculorum Deformans;
    • Motor Neuron Disease;
    • Ataxia;
    • Chorea;
    • Hemiballismus;
    • Aphasia;
    • Parkinsons Disease;
  2. Malignant Cancers;
  3. Full Blown Acquired Immuno-Deficiency Syndrome (AIDS);
  4. Chronic Renal failure;
  5. Hematological disorders:
    • Hemophilia;
    • Thalassaemia

4) Section 10(14) of Income tax act: Transport Allowance

Transport Allowance is granted to an employee to meet the expenditure on commuting between place of residence and place of employment. Salaried Individual can claim the benefit under section 10(14).

Deduction allowed: Rs 3200 Per Month

Important Points to be noted:

  • Transport allowance is granted to an employee, to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty. Most of employers pay Rs 800/- Per Month as the same is exempted. However, for employee, who is blind or orthopedically handicapped with disability of lower extremities, the exempted amount is Rs 3200/- Per Month
  • Employee can request employer to structure their pay in such a manner that they receive Rs 3200/- as monthly transport allowance to claim the benefit.
  • Tax Exempt is irrespective of actual expense. (No bills/receipts needed)

5) Section 64: Income of individual to be included in income of spouse, minor child, etc.

As per section 64(1A) Individual who has a minor child suffering from any disability of the nature specified in section 80 U then such income of the minor child shall not be clubbed in the hands of the parent/ individual.

Important Points to be noted:

  1. As the income of the child is not clubbed the child is treated as a separate entity and can file an independent return with all its benefits. For example, Individual can transfer their revenue generating asset like fix deposits in the name of disable child and the interest earned will not be clubbed with the income of individual but will be assessed separately, which provides significant scope for tax savings.
  2. Further the disable child while filing its own return can claim benefit under section 80U.

6) Profession Tax Act, State Maharashtra Section 27A Exemptions

Where a person is suffering from permanent physical disability (including blindness), then he is eligible for profession tax exemption under section 27A of the Maharashtra profession tax act. The other conditions for availing the exemptions are as under:

  1. The person must be having permanent physical disability as specified in the rules made on 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
  2. The individual shall forward the certificate to employer who will produces the aforesaid certificate before the prescribed authority in respect of the first assessment year for which he claims deduction
  3. As the professional tax is subject matter of state, which is responsible for collection, making rules and provide exemption, individual need to check with respective states for rules if any for exemption (the above exemption is in relation to Maharashtra State). In most states the Professional tax is exempted for disable person.

Deduction allowed: Complete amount of professional tax payable, Similar deduction is available in other states as well

7) Scheme for Providing Employment to Persons with Disabilities in The Private Sector

Who can claim the benefit: Private Sector Employers who are employing person with disability on or after 01-April-2008

Deduction / Benefits: Payment of the employer’s contribution to the Employees Provident Fund and Employees State Insurance for the first three years by Government.

Important Points to be noted:

Employees with disabilities, with monthly wage up to Rs.25000/- per month, working in the private sector would be covered. Those earning above 25000/- per month will not be eligible

The scheme will be applicable to the employees with disabilities employed covered under the Persons with Disabilities (Equal Opportunities. Protection of Rights and Full Participation) Act. 1995 and the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act. 1999.

The employers would submit a copy of the disability certificate including statement, issued to the disabled employee by the Competent Authority, first time when such benefit under EPF and ESI is claimed.

The Government will directly provide employer’s contribution for the schemes covered under the Employees Provident Fund & Miscellaneous Provisions Act. 1952 and the employment State Insurance Act 1948. This will be done in respect of employees for a maximum period of 3 years.