December 3 is observed as International Day of Persons with Disabilities to promote and support the rights and well-being of people with disabilities and rightly so. Surviving with disabilities or providing for the maintenance and medical treatment of a disabled family member can not only take an emotional but also financial toll. To mitigate the financial burden, certain tax breaks under the income tax (IT) laws are provided to persons with disabilities and individuals who support a dependent with disabilities.
Shailesh Kumar, partner, Nangia & Co LLP, explained how the I-T department defines disability. “As per clause (i) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995, disability refers to people with ‘autism’, ‘cerebral palsy’ and ‘multiple disabilities’ referred to in clauses (a), (c) and (h) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999),” he said.
For a disabled taxpayer
A person with at least 40% degree of disability can claim a flat tax deduction of ₹75,000 while filing her income tax returns (ITR). For those with severe disabilities, defined as a condition with 80% or more disability, deduction of ₹1.25 lakh is available.
Section 80U provides this tax benefit to individuals who are certified by a medical authority as a person with disability. The taxpayer is only required to furnish the disability certificate issued by a recognized authority as stated in Form 10-IA. No other documents or medical bills are needed to be submitted while claiming deduction.
For disabled dependents
Section 80DD provides tax deductions to individuals who pay towards maintenance and medical treatment of a disabled member in the family. The quantum of deduction is same as Section 80U; flat deduction of ₹75,000 if the severity of the dependent’s disability is between 40% and 80% and if it is over 80%, caretaker taxpayer can claim ₹1.25 lakh deduction.
These are flat deductions and can be claimed fully irrespective of the actual amount spent on the disabled dependent’s medical treatment. It is available to individual and HUF taxpayers.
Separately, Section 80DD gives relief from clubbing of income provision under section 64 that mandates adding income from investment made in the name of a dependent child or spouse to the taxpayer’s total income for taxation purposes.
“In a case where an individual has a minor child suffering from a disability referred to in section 80U of the Income Tax Act, 1961, any income earned by such minor child shall not be clubbed into the income of the parent,” said Kumar.