Income Tax Act, 1961 provides some benefits for the handicapped under Section 80U, Section 10(14) and Section 80DD. The first two benefits directly benefit the handicapped taxpayers, while the third benefit is for taxpayers having disabled dependents. It also provides indirect tax benefit under section 64 of the Income Tax Act, 1961.
Updates in Respect of Budget 2020
In view of the Budget 2020, applicable for the Financial Year 2020-21, it seems necessary to update this post.
Almost all deductions under Chapter VI-A, except Section 80CCD(2) [employer contribution in NPS] and section 80JJAA [for new employment], are abolished under the optional new tax regime. That means, the benefit of Section 80U will no longer be available along with other exemptions or deductions like Standard Deduction under Section 16 or tax saving schemes under Section 80C.
However, among very few exemptions allowed under the new regime, “Transport Allowance granted to a divyang employee to meet expenditure for commuting between place of residence and place of duty” notified under Section 10(14) will continue. As far as we understand, disabled taxpayers will have to pay less tax if they adhere to the old system. The choice should be made after calculating the actual taxes.
The rest of the post is on the existing system of Income Tax and therefore it applies to those cases where the taxpayer will opt to remain in the old system.
As per The Persons With Disabilities Act, 1995 “Disability” means-(I) Blindness; (ii) Low vision; (iii) Leprosy-cured; (iv) Hearing impairment; (v) Loco motor disability; (vi) Mental retardation; and (vii) Mental illness (viii) autism (ix) cerebral palsy (x) multiple disability.
Also remember that
“Person with disability” means a person suffering from not less than forty per cent of any disability as certified by a medical authority; (Section 2(t) of the Persons With Disabilities Act, 1995
“person with severe disability” means a person with eighty per cent or more of one or more disabilities. (Section 56(4) of the Persons With Disabilities Act, 1995
Income Tax Benefit of Exemption under Section 80U on Income of Disabled Persons
Section 80U provides deduction by virtue of which an individual (Indian citizen and foreign national) who is resident of India, and who suffers from not less than 40 per cent of any disability is eligible for deduction to the extent of Rs. 75,000/- and in case of severe disability (80% or above) to the extent of Rs. 1,25,000/-.
Income Tax Benefit on Transport Allowance of Disabled Employees under Section 10(14)
Section 10(14) Read with Rule 2BB has granted exemption to handicapped individual salaried employees on Transport Allowance to meet expenditure for the purpose of commuting between place of residence and place of duty up to Rs. 3,200/- per month. The employee who is blind or deaf and dumb or orthopedically handicapped with disability of lower extremities is eligible for this Income Tax exemption.
Please note that Budget 2018 has introduced Standard Deduction of Rs. 40,000/- in lieu of the exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. However, the Transport Allowance at enhanced rate (Rs. 3,200/-) continues to be available to differently-abled persons.
Income Tax Benefit under Section 80DD for Expenses on Maintenance / Medical Treatment of Disabled Dependent
Section 80DD has provided some relief to those who have a dependent with disability or severe disability with some relief from Income Tax. Deduction allowed under this section is Rs. 75,000/- if disability of the dependant is at least 40%. Deduction goes up to Rs. 1,25,000/- if the dependant is with severe disability, i.e. 80% or above.
Individuals and Hindu Undivided Families who are Indian residents can claim deductions under Section 80DD of the Income Tax Act. Non-resident individuals are not eligible to claim deductions under this section.
So far as individuals are concerned, their spouse, children, siblings and parents are considered as disabled dependents under Section 80DD of the Income Tax Act. For Hindu Undivided Families any member of the Hindu Undivided Family can be a disabled dependent.
Expenses incurred on medical treatment, rehabilitation, training or nursing of a disabled dependent can be claimed as deductions under Section 80DD of the Income Tax Act. Even expenses incurred on premium payments on certain insurance policies that are especially designed for such cases can be claimed as deductions provided that the policy satisfies the conditions prescribed in the law.
The disabilities which qualify for tax benefits under Section 80DD of the Income Tax Act include blindness, loco motor disability, low vision, mental illness, mental retardation, leprosy-cured, hearing impairment, cerebral palsy and autism.
No Clubbing of Income of Disabled Minor with Income of His Parents under Section 64
Although there is no direct deduction under section 64, income generated by minor child who is disable will not be clubbed with the Income of his parents. As the income of the child is not clubbed, the child is treated as a separate Individual and can file his independent Income Tax return with all its benefits.
An 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. Further the disable child while filing its own return can claim benefit under section 80U.
I want to know whether an exemption of Rs3200/- pm is allowed to disabled person in addition to standard deductiono f Rs50,000 OR in lieu of that?
Yes, it is still available.
Can I take rebate both 80u and 80dd simultaneously in a financial year
Section 80U exemption is for disabled taxpayer while section 80DD is for disabled dependents of taxpayer. If the taxpayer himself is disabled and he also has a disabled dependent, he can abail himself of the benefits of both these sections; otherwise he cannot. That means, if the taxpayer himself is a disabled person, but he does not have a disabled dependent, he cannot claim exemption under section 80DD. He is entitled to section 80U.
Whether maximum of 125000 is allowed or 125000 and actual whichever is higher?
Under section 80U of the Income Tax Act, 1961 an individual taxpayer is eligible for exemption from income tax for Rs. 75,000.00 if he is physically disabled. If he is severely disabled, i.e. if his disability is above 80%, his exemption will go up to Rs. 1,25,000.00. It is not an exemption on actual expense and therefore the question of actual amount of exemption does not arise. The exemption will be either Rs. 75,000.00 or Rs. 1,25,000.00, subject to the extent of disability of the taxpayer. However, exemption under section 80DD is restricted to the amount of actual expenses incurred for a disabled dependent. So, the exemption should be Rs. 75,000.00 (or Rs. 1,25,000.00 if disability is severe) or the actual expense, whichever is less.
Hi.. my father’s is one eyed and that one also vision is not clear, can i claim tax benefit under sec 80DD if yes, how much and what certificate is needed to claim. please advise.