Keeping in view the infrastructural challenges faced by the persons with disabilities and the extra cost they need to bear for their daily lives, the Income Tax Department of India has granted some special tax benefits to persons with disabilities. There are many disabled people who are eligible for such rebates but they do not know about these reliefs provided to them by the tax authorities. Moreover, the language of laws is quite cumbersome for a layman to understand. Today we will give you the simplest explanations of the three important sections of the Income Tax Act, 1961 that deal with deductions for persons with disabilities or a person who has a dependent with disability.
What is a tax deduction?
In simple terms, tax deduction is the discount given by the tax authorities on a person’s income tax.
It is necessary to understand that deduction is different from exemption and a grant. When we talk about deduction many people confuse it with these two terms.
Grant is something that government gives without taking something in lieu of it. When we say persons with disabilities are eligible for tax deduction we do not mean government will give them some money; it simply means the person will get a discount in their tax liability.
When an amount is exempted, it is simply not taken into account while calculating a person’s income.
In case of deduction the total tax amount is calculated and the amount allowed as deduction is subtracted.
Who is considered a person with disability?
First of all we need to understand who could be considered as a disabled person. The law states that anyone suffering with 40% or more of disability is a disabled person. For the sake of segregation in amount of tax benefits, the law divides persons with disabilities in two categories:
- If a person has 40% to 80% disability she will be deemed as a Person with Disability (PwD)
- If the disability is 80% or above; the person will be deemed as a Person with Severe Disability (PwSD)
What is disability according to law?
The Rights of Persons with Disabilities Act, 2016 recognizes 21 types of conditions as disabilities. These conditions are:
- Leprosy Cured persons
- Hearing Impairment (deaf and hard of hearing)
- Locomotor Disability
- Intellectual Disability
- Mental Illness
- Autism Spectrum Disorder
- Cerebral Palsy
- Muscular Dystrophy
- Chronic Neurological conditions
- Specific Learning Disabilities
- Multiple Sclerosis
- Speech and Language disability
- Sickle Cell disease
- Multiple Disabilities including deaf-blindness
- Acid Attack victim
- Parkinson’s disease
How much tax deduction is allowed as benefit for disabled persons?
Deduction allowed for disability is of fixed nature i.e. it is a fixed amount regardless of the income of the person.
Tax benefit for a person with disability
A person with disability (i.e. someone who has 40% to 80% disability) can deduct Rs. 75,000 from her overall income. The person does not need to pay income tax on this amount.
Tax benefit for a person with severe disability
A person with severe disability (i.e. someone who has 80% or above disability) can deduct Rs. 1,25,000 from her overall income. The person does not need to pay income tax on this amount.
Under which sections tax benefits for disabled persons are provided?
The disability deduction is allowed under section 80DD and 80U
- Section 80DD – An assessee who has a person with disability in her family who is a minor or mainly dependent on her for survival can claim tax deduction u/s 80DD.
- Section 80U – An assessee who herself is disabled is eligible to claim deduction u/s 80U. She does not need to have any proof of expenses to avail this benefit.
Note 1: If you want rebate under section 80DD, the assessee may need to furnish proof of medical, nursing or rehabilitation expenses incurred on the disabled dependent along with the disability certificate.
Note 2: It is mandatory to note that if a person with disability is seeking deduction u/s 80U his parents/guardian cannot claim deduction u/s 80DD and vice versa.
Note 3: Same deduction amount is allowed under both the sections.
What are the documents required to avail disability tax benefits?
In case of autism, Cerebral Palsy and multiple disabilities, form 10-IA may need to be filled. However, we don’t see anymore use of this form because these three conditions are now part of the list of recognized disabilities.
So, essentially, you simply need your certificate of disability obtained from the medical authority of central or state government.
How to get disability certificate?
A disability certificate may be issued by:
- Civil surgeon or Chief Medical Officer of a government hospital
- A neurologist with MD in neurology
- A Paediatric with same level of degree (only for children)
Note 4: Now the government has begun to issue the Unique Disability ID in place of disability certificates.
Note 5: If the disability is of permanent nature then a permanent certificate will be issued. But if the disability requires reassessment then there will be an expiry date of the certificate. In such case deduction will be allowed only if the certificate hasn’t expired. You need to renew your certificate for availing further benefits.
We hope this article was useful for you. Should you have any questions, please feel free to ask in the comments section below. We will try to answer your query.