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The income tax is the tax gathered from earning citizens of a country whose income comes under the predefined tax brackets. The calculation for the income tax is done based on the yearly income and will differ depending on the income earned.
The whole process of income tax filing in India is governed by the Income Tax Act, 1961. The Act not only provides information about tax collection but also lists information about tax deductions and exemptions under various sections. Section 80U of the Act highlights information about tax deductions a citizen is eligible for if they or any member of their family suffer from certain disabilities. Any citizen who has been clinically certified as an individual with a disability can claim the tax benefit under this section.
What constitutes disability to be eligible for Income Tax Deductions under 80U?
A taxpayer suffering from at least 40 percent disability, with certification from a medical authority or institution, can be defined as disabled as per the Persons with Disability (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995. Disabilities are classified into the following 7 categories:
1. Minimal vision:
People with this condition suffer permanent visual impairment but can use their eyes with the aid of certain devices
2. Hearing impairment:
When the person’s hearing ability suffers a loss of at least 60 decibels.
A complete loss of sight, or limited vision or visual acuity, which is less than 6160 after using a corrective lens, can be labelled blindness.
4. Cured Leprosy:
Those who have recovered from leprosy but still suffer from lasting damage to their limbs and even eyes. This also applies to aged people or those with severe deformities which prevent them from taking up a valuable occupation.
5. Motor Disability:
Individuals with minimal limb movements due to the disability of the bones, muscles or joints come under this category.
6. Mental Retardation:
Individuals with an incomplete or partial development of their mental capacities that leads to subnormal intelligence come in this category.
7. Mental Illness:
This category includes individuals suffering from mental disorders or conditions that are not related to mental retardation.
Apart from the disabilities mentioned above, the act also includes a category for severely disabled individuals. Hence, the tax deduction limit will vary accordingly. If one suffers from more than 80 per cent disability or more in the above categories, then they are considered severely disabled. Disabilities like cerebral palsy and autism are included in this category.
Income Tax Deductions
under Section 80U
The deduction that a disabled individual can avail on their taxable income is up to ₹75,000. If the disabled individual suffers from 80% disability, the deduction amount is ₹1,25,000.
Considering the first example, where an individual suffers from less than 80% disability and has an aggregate income of ₹10,00,000, a deduction of ₹75,000 will bring the figure to ₹9,25,000. Hence, the tax calculation will change, as well. The table below explains how:
|No deductions under Section 80U||With deductions under Section 80U|
|Gross Total Income – ₹10 lakhs Taxable income – ₹10 lakhs||Gross Total Income – ₹10 lakhs Taxable Income – ₹9.25 lakhs|
|Tax to be paid on income between ₹2.5 lakhs-INR 5 lakhs – 5% of ₹2.5 lakhs = ₹12,500
Tax to be paid on income between ₹5 lakhs and ₹10 lakhs – 20% of INR 5 lakhs = ₹1 lakh
|Tax to be paid on income between ₹2.5 lakhs and ₹5 lakhs – 5% of ₹2.5 lakhs = ₹12,500 |
Tax to be paid on income between INR 5 lakhs and ₹9.25 lakhs – 20% of ₹4.25 lakhs = ₹85,000
|Total tax to be paid = ₹112,500||Total tax to be paid = ₹97,500|
Claiming Income Tax
Deductions under Section 80U:
If you want to register a claim, you will need to provide the medical certificate highlighting the disability. Apart from this, you will also need to provide a return of income certificate following Section 139 for the year of assessment. If your disability assessment certificate expires, you will still be eligible for claiming tax deductions in the expiry year of the certificate. However, to claim the benefits under Section 80U, you will need a new certificate from the upcoming year.
You can gather the certificates from medical authorities that are authorized by the Government of India. This can include a Civil Surgeon from any government hospital, Chief Medical Officer (CMO), a paediatric neurologist or an MD in Neurology.
Although the process of understanding tax payments can seem a bit daunting, with assistance from the tax savings guide provided by Kotak Life, your tax filing process can be smooth. This guide provides not only useful, well-researched information on how to file taxes but also different ways to lower tax liabilities
The Income Tax Laws in India provide the benefit of tax deductions to disabled individuals under Section 80U. The individual will have to provide a certificate from an appropriate medical institution to claim these tax deductions legally. If you have any of the disabilities listed by the law, you are eligible for these deductions. To claim the benefits, you will need to provide the medical certificate, certifying the disability, and the return of income certificate.