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Income Tax Exemption for Physically Handicapped Dependent

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  • 9th Mar 2021
  • 2,881
Income Tax Exemption for Physically Handicapped Dependent

Income tax is a tax that is collected by the Government of India from the earning members of the nation. It is calculated based on the gross yearly income and can differ as per the income capabilities of the individual. The collection, monitoring, and administration of this tax are governed under the Income Tax Act of 1961. This act not only authorizes tax collection but also states tax benefits and deductions that can be used to lower a person’s tax liability. One such provision is for people with a physically handicapped dependent under Section 80DD of the Act.

Section 80DD of the Income Tax Act of 1961 allows individuals to claim tax-saving deductions for disabled and financially dependent family members. However, in order to claim income tax exemption for disabled dependents, the following criteria are crucial:

1. Only allowed for resident individuals and Hindu Undivided Families (HUFs): This tax deduction can only be claimed by a resident individual or HUF.

2. Not allowed for Non-Resident Individuals (NRIs): An NRI cannot claim this deduction.

Disabilities covered to qualify for tax deduction under Section 80DD

The disabilities covered under Section 80DD are given below:

1. Mental illness: This includes mental illnesses or disorders.

2. Any hearing impairment: This refers to a hearing power of fewer than 60 decibels.

3. Autism: This includes a person suffering from autism spectrum disorder.

4. Mental retardation: This refers to someone with incomplete or partial mental development.

5. Any locomotor disability: This includes joint or muscle disabilities resulting in restricted limb movement.

6. Blindness: This includes lack of sight by 20 degrees or more, visual acuity less than 6160 with glasses or lens, or complete blindness.

7. Cerebral palsy: This refers to a movement or posture disorder usually caused before or at birth due to abnormal brain development.

8. Leprosy-cured: This includes people who have been cured of leprosy but continue to face challenges like loss of sensation, paresis in eyes,

deformities, etc.

9. Low vision: This includes a low vision that cannot be corrected with surgery.

Terms and conditions to claim income tax exemption for the physically handicapped dependent

The following conditions have been mandated by law to claim tax deduction under Section 80DD:

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  • The deduction is allowed for the dependent, disabled individual and not the taxpayer.
  • The disability of the dependent individual should be more than 40%.
  • The dependent disabled family member for a resident individual can be defined as a spouse, a parent, a child, or a sibling.
  • The dependent disabled person in case of a HUF can be any member of the HUF.
  • If the dependent, disabled individual has already claimed a deduction under Section 80U for themselves, the taxpayer cannot avail another deduction for the dependent individual.
  • The taxpayer should have paid for the expenses arising out of healthcare costs for the disabled dependent individual. This can include nursing, rehabilitation, and training. The taxpayer can also pay for a policy or scheme, such as the Life Insurance Corporation (LIC) to ensure proper maintenance of the disabled person.
  • Amount claimed as a deduction for physically handicapped and disabled dependent

    The following sum can be claimed as a deduction:

    • Taxpayers with dependent, disabled individuals with a 40% - 80% disability can claim ₹75,000.
    • Taxpayers with dependent, disabled individuals with 80% or more disability can claim ₹1,25,000.

    Kotak’s tax-saving guide

    Kotak provides you with a well-researched, expert tax-saving guide that can help you lower your tax liability by using the right approaches. Refer to this guide for useful information on how to file and save tax.

- A Consumer Education Initiative series by Kotak Life

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