Know all Income Tax Benefit for Person with Disability

Know all Income Tax Benefit for Person with Disability

As per recent estimate there are more than 2.62 crore people in India who are differently able. The challenges and hardship which they face are enormous form getting basic education, rehabilitation, continuous cost of medical requirements and getting job or practicing a profession or vocation. The government of India has provided various concessions and reservations to empower differently able person and their families.

In India there are many disabled individual and families who are tax payers also there are many individuals who have dependents who are disabled, but are not aware of the provision of the Income Tax Acts which provides various benefits and concession in tax. Further the government has also given several concessions to private sector to encourage them to appoint differently able person.

In this article we will be highlighting the various benefits government provides under the Income Tax Act, and schemes to encourage private sector to provide employment opportunities to differently able.

The deduction under section 80U, 80DD, 80DDB and 10(14) under Income Tax Act are direct deduction were as through proper tax planning one can claim benefit under section 64(1) of Income Tax Act. There is also one scheme introduce by Government to encourage private sector to employee person who are differently able. The following are the all 7 different benefits:

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.

Case study:

Where the assessee pays income tax as per old rates

Mr. X has total income of Rs. 10 lakhs for the previous year 2019-20. 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%

Particulars	Disability more than 40% but up to 80%	Disability more than 80%
Total Income	10,00,000	10,00,000
Less: Deduction u/s 80U	(75,000)	(1,25,000)
Net Total Income	9,25,000	8,75,000
Tax on total income as per old slab rates	97,500	87,500
Health and Education cess at 4%	3,900	3,500
Total tax liability	1,01,400	91,000

Where the assessee pays income tax as per new rates

Mr. X has total income of Rs. 10 lakhs for the previous year 2019-20. 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%. As per new income tax regime 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.

Particulars	Disability more than 40% but up to 80%	Disability more than 80%
Net Total Income	10,00,000	10,00,000
Tax on total income as per new slab rates	75000	75000
Health and Education cess at 4%	3,000	3,000
Total tax liability	78,000	78,000

Break even income:

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%

Particulars	Income Tax liability under old Regime	Income Tax liability under New regime
Total Income	15,00,000	15,00,000
Less: Deduction u/s 80U	(1,25,000)	0
Net Total Income	13,75,000	15,00,000
Tax on total income as per old slab rates	2,25,000	1,87,500
Health and Education cess at 4%	9,000	7,500
Total tax liability	2,34,000	1,95,000

• 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%

• 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:

Age	Amount of Deduction
Less than 65 years	Rs. 40,000
More than 65 years	Rs. 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.
   1. Dementia;
   1. Dystonia Musculorum Deformans;
   1. Motor Neuron Disease;
   1. Ataxia;
   1. Chorea;
   1. Hemiballismus;
   1. Aphasia;
   1. Parkinsons Disease;
2. Malignant Cancers;
3. Full Blown Acquired Immuno-Deficiency Syndrome (AIDS);
4. Chronic Renal failure;
5. Hematological disorders:
   1. Hemophilia;
   1. Thalassaemia

• 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)

• 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.

• 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

• 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.

Though the government has provided some relief in tax, however much can be done to further empower the differently able people. The exemption under 80U and deduction for expenditure incurred for medical treatment under 80DD should be increased to Rs. 2,00,000/-, considering rising cost of living and increasing cost of medicine supplies and rehabilitation.  One of the major problem person with disability faces is in travelling, most of them spend huge amount on commuting to work places as public mode of transport is not accessible for wheelchair users and for most other users, considering this government should increase the limit of transport allowance exemption for salaried class up to Rs. 5000/- Pm. The introduction of scheme to encourage private sector to employee differently able person is good step by government. As per annual report 2009-10 by ministry of social justice and empowerment, under the scheme, 144 and 261 persons have been registered by Employees Provident Fund Organization (EPFO) and Employees State Insurance Corporation (ESIC) respectively till 30.09.2009. though the initially target was to create 1 Lakh job every year. Though the response has been dreadful, government needs to increase the incentive for further participation by private sector. For example, government should link incentive for private sector to create work places accessible, increase the limit from 3 years’ contribution to life long, etc. with budget and election coming we can hope some more promises from government.

• Economic assistance by public sector banks to the disabled persons

Under the scheme of the public sector banks differential rate of interest is been available to orphanages, Women’s Homes and Physically handicapped persons as well as to the institutions which are working for the benefit of the handicapped persons. The other details of the scheme are as under:

Physically handicapped person is eligible for taking loans under this scheme, if they satisfy the following:

1. The person should be conducting a proper occupation
2. The total family income from all the sources should not exceed Rs. 7,200/- in case of Urban areas and Rs. 6,400/- in case of rural areas
3. The person must not be holding land of more than 1 acre of irrigated land or 25 acre of unirrigated land
4. The person should work on his own and with the help of other members of their family or some joint partners may give them and should not employ paid employees on a regular basis.