Disabled can claim tax saving deductions up to Rs 1.25 lakh
The Income Tax Act 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 expenses incurred for this purpose.
Though the working of these two deductions is the same, one must remember that 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 a deduction for the medical expenses incurred for differently abled persons. The amount of deduction is the same for both 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 deduction under both sections 80DD and 80U.
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 like 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 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 the death of the individual for the maintenance of the dependent person suffering from a disability," says Soni.
Conditions for claiming a deduction
The deduction under either section 80DD or 80U can be claimed only if the individual himself or dependent is suffering from a 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 from blindness, low vision, leprosy-cured, hearing impairment, locomotor disability, mental retardation, mental illness, autism, cerebral palsy and multiple disabilities. A person with a disability means a person suffering from not less than 40 percent of any disability as certified by a medical authority."
Similarly, autism, cerebral palsy and multiple disabilities take their meaning from the National Trust for the 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 percent or more disability but less than 80 percent, 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 percent, 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".
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 the 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 pediatric 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.