Tax Savings Made Easy: Understanding Section 80U for Disabled Individuals

Income Tax Benefits for The Persons with Disability

In line with other laws made for the concessions and welfare of differently-abled persons, Income-tax Act also contains the special provisions for the differently-abled persons. These provisions are scattered under different chapters of the Income-tax Act. In common parlance, we find mention of only provisions related to tax deductions under chapter VIA of the Income-tax Act. However, there are other provisions too which may help the differently-abled persons and their relatives to save tax on their incomes. This article attempts to explain them in one place.

Deductions from Gross Total Income

Once you compute your gross total income from all sources, you can claim deductions to reduce your taxable income and tax thereon. More common such deductions are discussed here. However, if you are a differently-abled person or any differently-abled person is dependent on you, you are eligible to claim an additional deduction of ₹75,000/- or ₹125,000/- in case of severe disability. These two deductions are similar in many respects. The summary is discussed here:

Tax Savings for disabled

Tax deduction for the disabled dependent

If any of your dependent relatives suffers from any disability and he/she is fully dependent on you for maintenance, you can claim a deduction against the expenses incurred on the treatment, training, or rehabilitation of such a person. This deduction can also be claimed against the deposits or premium paid in respect of the insurance policies drawn in the name of the beneficiary dependent. The amount of deduction is ₹75,000/- in case of disability of 40 to 80% as certified by the relevant medical authorities. However, in case the disability exceeds 80% as per relevant certification, the amount of deduction is ₹1,25,000/-.

It is to be noted that such a deduction is not related to the amount spent by you. It is independent of the amount spent and is a fixed amount deduction. No certificate is required to be attached with the I-T Return while claiming the deduction, but such a valid certificate must be in possession of the person claiming the deduction.

As per law, the dependent is defined as the relative who is fully dependent on maintenance on the person claiming such a deduction. The relatives who are defined are spouses, children, parents, or brothers, or sisters.

This deduction can not be claimed beyond the valid date of the certificate of disability. This deduction can also not be claimed for disability lesser than 40% as per the relevant certificate.

Tax deduction for the disabled person himself

If the disabled person is a taxpayer and is not dependent on anybody for maintenance and support, then he himself can claim the deductions discussed above against his income. All the conditions for eligibility and the amounts for deductions remain the same.

Transport Allowance

The tax relief on the transport allowance for the taxpayers stands withdrawn from Budget 2015. However, tax relief stays for disabled persons. So, if the disabled person is getting a transport allowance for commuting from his home to office or place of work, the prescribed amount of such allowance is not taxable. This relief is applicable to those persons who are blind or deaf and dumb or handicapped in lower limbs. The maximum amount of such relief is ₹3200/- per month. This means, if you are getting a transport allowance of ₹4000/- per month, then the amount of ₹3200/- per month is not to be included in taxable income. In case, if you are getting an allowance of ₹3,000/- per month, the said relief shall be limited to ₹3,000/- per month.

Excess Tax Relief on Insurance Policy Premium

The deduction in respect of premium paid in respect of insurance policy is claimed u/s 80C of the Act. Such a deduction is restricted to the amount of premium paid or 10% of the assured sum whichever is lesser. In the case of disabled persons, such a limit of an assured sum is raised to 15% instead of 10% in respect of ordinary taxpayers.

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Excess Tax Relief on Insurance Policy Proceeds

In case you receive the proceeds of insurance policy on the maturity of the same, the amount received is taxable or not is decided on the conditions attached to it. One of the conditions is that the premium paid by you should not exceed 10% of the sum assured in any of the years during the life of the policy. In the case of disabled persons, such a limit of an assured sum is raised to 15% instead of 10% in respect of ordinary taxpayers. File ITR with TaxBuddy