Income Tax Benefits for the Handicapped
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.
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-baled 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.