Tax relief on caring for a disabled person (Part I)

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I am sure we all feel worthy and peaceful when we do a noble deed. Now the benefits are twofold. You also get a tax benefit out of this honourable deed. The government of India has rightly understood the emotional status of Indians by giving tax reliefs in this area. 

The Income Tax Department has allowed certain deductions to the families of the disabled. One such deduction is through section 80DD. 

80DD: Deduction in respect of maintenance including medical treatment of a dependent who is a person with disability 

Who is eligible to claim deduction
The deduction can be claimed only by an Individual or a Hindu Undivided Family, who is a resident, taking care of a dependent, and who has not claimed any deduction under Section 80U (where the individual is disabled himself). 

What expenses are eligible for deduction? 
Deduction under 80DD can be claimed on any expenditure incurred on the medical treatment (including nursing) training and rehabilitation of a dependant, who is a disabled person. 

Definition of Dependent 

Dependent means: 

  • In the case of an individual, the spouse, children, parents, brothers and sisters of the individual or any of them
  • In the case of a Hindu Undivided Family, a member of the Hindu Undivided Family 

Dependent wholly or mainly on such individual or Hindu Undivided Family for his support or maintenance, and who has not claimed any deduction under section 80U in computing his total income for the assessment year relating to the previous year. 

What is considered as Disability? 
The disabilities are those which are specified in “The Persons with Disability (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995” and includes “autism”, “cerebral palsy” and “multiple disability” 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). 

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1. Blindness: It refers to a condition where a person suffers from any of the following conditions, namely: –

  • Total absence of sight or
  • Visual acuity not exceeding 6160 or 201200 (Snellen) in the better eye with correcting lenses or
  • Limitation of the field of vision subtending an angle of 20 degree or worse;

2. Low vision – “Person with low vision” means a person with impairment of visual functioning even after treatment or standard refractive correction but who uses or is potentially capable of using vision for the planning or execution of a task with appropriate assistive device;

3. Leprosy-cured– A person who has been cured of leprosy but is suffering from- 

  • Loss of sensation in hands or feet as well as loss of sensation and paresis in the eye and eye-lid but with no visible deformity;
  • Manifest deformity and paresis but having sufficient mobility in their hands and feet to enable them to engage in normal economic activity;
  • Extreme physical deformity as well as advanced age which prevents him from undertaking any gainful occupation.

4. Hearing impairment- Loss of 60 decibels or more in the better ear in the conversational range of frequencies;

5. Loco motor disability– It is the disability of the bones, joints muscles leading to substantial restriction of the movement of the limbs or any form of cerebral palsy.

6. Mental retardation – It is a condition of arrested or incomplete development of mind of a person which is specially characterized by sub normality of intelligence;

7. Mental illness –Any mental disorder other than mental retardation; 

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What is considered as severe disability 

Severe Disability is described as a person with 80% or more of one or more aforementioned disabilities. 

Amount of Deduction and Tax Saving 
The deduction by the individual/ HUF who takes care of the dependant can be claimed from the Gross Total Income at INR 50000 in case of a severely disabled person and INR 100000 in case of a dependent person with severe disability. The provisions have increased to 75000 and 125000 respectively with effect from 1st April 2016. 
Deduction is not dependant on the amount of expenses incurred and the taxpayer would be eligible for the full deduction provided he meets the specified conditions. 

LIC: 
Deduction can also be claimed when any amount is paid or deposited for looking after a disabled person under a scheme framed in this behalf by the Life Insurance Corporation (“LIC”) or any other insurer approved by the board for the maintenance of such handicapped dependent. Such scheme should provide for the benefit of a lump sum amount for the benefit of the dependent in the event of the taxpayer’s death.  

The taxpayer can either nominate the dependent being a person with disability or any other person or trust to receive the payment on his behalf for the benefit of such dependent.  

Taxability of Premium Amount Paid in Case disable dependant dies before the taxpayer 
If the dependant, being a person with disability, predeceases the individual or the member of the Hindu undivided family, an amount equal to the amount paid or deposited under the LIC schemer shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year. 

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Documentation: 
For claiming the deduction, the taxpayer shall furnish, alongwith return of income, a copy of the certificate issued by medical authority: 

I. Where the person with disability or severe disability is suffering from autism, cerebral palsy or multiple disability: in Form No. 10-IA 
II. In any other case: In the prescribed form (refer link http://www.incometaxindia.gov.in/_layouts/15/dit/Pages/viewer.aspx?path=http://www.incomet axindia.gov.in/Rules/Income-Tax%20Rules/103120000000007835.htm&IsDlg=0) 

Where the condition of disability is temporary and requires reassessment after a specified period, the certificate shall be valid for the period starting from the assessment year relevant to the previous year during which the certificate was issued and ending with the assessment year relevant to the previous year during which the validity of the certificate expires. Thus, it needs to be renewed periodically. 

What is a medical authority? 
As per Rule 11A of the Income Tax Rules, Medical authority shall consist of the following: 
a. a Neurologist having a degree of Doctor of Medicine (MD) in Neurology (in case of children, a Paediatric Neurologist having an equivalent degree) b. a Civil Surgeon or Chief Medical Officer in a Government hospital.