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    Disabled can claim tax saving deductions up to Rs 1.25 lakh under sections 80DD, 80U

    Synopsis

    "The amount of deduction depends on the percentage of disability. The deduction claimed is fixed irrespective of the actual expenses. The deduction availed for differently abled can be claimed under the exisitng tax regime of the Income-tax Act, 1961.

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    To claim this deduction, either under Section 80DD or Section 80U, one is required to provide a certificate of disability.
    The Income-tax Act, 1961 allows deductions from your gross total income, before the levy of tax, if medical expenditure has been incurred on the treatment of a differently abled person. Sections 80DD and 80U of the Income-tax Act deals with the medical expenditure incurred for this purpose.

    Though the working of these two deductions is same, according to income tax rules, these cannot be claimed simultaneously. Abhishek Soni, CEO, tax2win.in, a tax-filing website says, "Section 80DD and Section 80U of the Income-tax Act allows deduction for the medical expenses incurred for differently abled persons. The amount of deduction is same for both the sections. However, Section 80DD can be claimed by the person who has incurred expenses for the dependent differently-abled person. On the other hand, 80U can be claimed by the individual if he/she, himself/herself, is differently abled. If the individual is claiming deduction under section 80U, then no other person can claim deduction under section 80DD for the aforesaid person."

    Here is everything you need to know about claiming deductions under both sections 80DD and 80U of the Act under the exisitng/old tax regime.

    Who can claim the deduction?
    As mentioned above, deduction under section 80DD can be claimed by a resident individual who has incurred expenditure on the training, rehabilitation, medical treatment of a differently-abled or disabled dependent person.

    The income tax law defines a dependent person as spouse, children, parents, brother and sisters of the individual who are fully dependant on the individual for the support and maintenance.

    "The deduction can also be claimed if a payment or deposit has been made by the individual under any scheme of Life Insurance Corporation (LIC), or any other insurer or any other specified scheme or deposit for the maintenance of the dependent. The scheme should provide the annuity or lump-sum benefit in the event of death of the individual for the maintenance of the dependent person suffering from disability," says Soni.

    Budget 2022 has proposed new tax benefit for parents of disabled. As per proposed tax sop, if the parent/guardian of a disabled person buys a savings life insurance policy with the latter as beneficiary then the parent/guardian would be eligible to deduction from gross income before tax subject to certain conditions. This tax sop can be claimed even in cases where the policy benefits/payouts start while the buyer of the policy is still alive.

    Also Read: Budget 2022 offers tax benefit for parents of disabled

    Also, do keep in mind that if you opt for the new tax regime, you will have to forgo the benefits under both these sections. From FY 2020-21, an individual can continue with the old/existing tax regime by availing of existing deductions and tax exemptions. He/she also has the option to opt for the new, concessional tax regime without claiming any deductions and tax exemptions. The tax benefits one forgoes by opting for the new tax regime in current FY 2021-22 include deductions under: section 80C for a maximum of Rs 1.5 lakh claimed by investing in specified financial products, section 80D for health insurance premium paid, 80TTA for deduction on savings account interest earned from a bank or post office, tax benefits available under sections 80DD and section 80U etc.

    Conditions for claiming deduction
    The deduction under either section 80DD or 80U can be claimed only if the individual himself or dependent is suffering from disability, autism, cerebral palsy or multiple disabilities.

    The percentage of disability should not be less than 40 percent in order to be eligible to claim deduction under these sections. In case you are claiming the deduction allowed for severe disability, then the disability level should be minimum 80 percent.

    To avoid the rejection of the claim for deduction by the income tax department, one must also satisfy the definition of disability, autism, cerebral palsy or multiple disabilities as per the act governing the same.

    Disability is defined as per the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1955. Soni says, "As per Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995, disability is defined as someone who is suffering with blindness, low vision, leprosy-cured, hearing impairment, loco motor disability, mental retardation, mental illness, autism, cerebral palsy and multiple disabilities. Person with disability means a person suffering from not less than 40 per cent of any disability as certified by a medical authority."

    Similarly, autism, cerebral palsy and multiple disabilities take their meaning from the National Trust for welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999. Soni says, "Multiple disabilities can be defined as the person suffering from a combination of two or more disabilities as defined in Person with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995."

    Amount of deduction depends on disability, not expenses & age
    The amount of deduction that can be claimed depends on the percentage of disability. If the individual or dependent has 40 per cent or more disability but less than 80 per cent, then the deduction of Rs 75,000 can be claimed in a financial year.

    In case of severe disability, i.e., if the percentage of disability exceeds 80 per cent, then the deduction of Rs 1.25 lakh is allowed.

    Soni says, "The amount of deduction depends on the percentage of disability. The deduction claimed is fixed irrespective of the actual expenses. Therefore, even if the actual expenses are less than Rs 75,000 or Rs 1.25 lakh as applicable, you can still claim the mentioned amount".

    Documents required
    To claim this deduction, either under Section 80DD or Section 80U, one is required to provide a certificate of disability. Soni says, "As per the income tax laws to claim deduction, one is required to obtain a certificate in the prescribed manner as mentioned in Form 10-IA. The certificate must be obtained from the prescribed medical authority."

    The medical authority who is required to issue the disability certificate shall be a neurologist having a degree of Doctor of Medicine in Neurology (in case of children, a paediatric Neurologist having an equivalent degree) or a civil surgeon or chief medical officer in a Government hospital.

    "No deduction will be allowed from the financial year from which the disability certificate has expired, unless a new certificate is obtained from the aforesaid medical authority," says Soni.
    ( Originally published on Mar 14, 2019 )

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