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Ref. No. KLI/22-23/E-BB/492
Ref. No. KLI/22-23/E-BB/490
When a person becomes disabled, they are eligible for tax benefits under Section 80U, whereas dependent family members of an individual taxpayer are eligible for tax benefits under Section 80DD. The discussion of Section 80U disabled tax benefits is the main focus of this article.
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.
Who Can Claim Deduction Under Section 80U?
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 exemptionsv 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 tax exemption can claim the tax benefit under this section.
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.
5. Mental Illness
This category includes individuals suffering from mental disorders or conditions unrelated 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 percent disability or more in the above categories, then they are considered severely disabled. Disabilities like cerebral palsy and autism are included in this category.
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
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 assessment year. If your disability tax exemption assessment certificate expires, you will still be eligible for claim tax deductions in the expiry year of the certificate. However, to claim the benefits under section 80U of the income tax act, you will need a new certificate from the upcoming year.
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Other than the Form 10-IA disability certification from a recognised medical authority, there are no other requirements for documentation. There is no requirement to provide receipts for treatment payments or other expenses.
To lodge a claim under this section, you must have a medical certificate stating that you have a disability and income tax returns that were filed in compliance with Provision 139 for the relevant AY. If the certificate for the disability evaluation has passed its expiration date, one may still make these deductions in the following year. You would require a fresh certificate starting the following year to collect the benefits under section 80U of the income tax act.
Certificates might be issued by civil surgeons, chief medical officers of government hospitals, or neurologists with a Doctor of Medicine (MD) in Neurology degree (or, in the case of children, a pediatric neurologist with an equal degree).
The certificate’s validity begins with the assessment year relevant to the financial year during which it was issued and ends during the assessment year relevant to the financial year.
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.
Ref. No. KLI/22-23/E-BB/999
Ref. No. KLI/22-23/E-BB/490