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Income Tax Exemption for Physically Handicapped Dependent

Learn about what are the deductions for disability of dependent under section 80DD in Income Tax Exemptions. To know more, Visit Now

  • Mar 09, 2021

It is natural that we want to look after the people we care about, when we become older. However, a stronger commitment is required when a loved one has a disability that necessitates round-the-clock care. It’s just as crucial to meet their daily needs as it is to ensure their future. The most recent health crisis has served as a strong reminder of the life-altering impact pandemics and other disasters can have on vulnerable people and their families. A sudden illness or accident can be tough to overcome without a financial plan to offer a safety net for your loved ones.

This is why putting together a mix of financial instruments, including life insurance , is crucial to safeguarding your family. In addition, the increased duty of supporting a loved one who has a disability necessitates the creation of a long-term financial plan for their care. While these investments assure the financial security of loved ones in the future, significant tax benefits are now available for the support and maintenance of a differently-abled dependent under the Income Tax Act, 1961.

Section 80DD of the Income Tax Act, 1961

Income tax is a tax 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. For people with a physically handicapped dependent, this act offers provisions under Section 80DD.

Section 80DD of the Income Tax Act, 1961 allows individuals to claim tax-saving deductions for disabled and financially dependent family members.

Eligibility Criteria

Following criteria are crucial to claim income tax exemption for disabled dependents:

1.This tax deduction is only allowed for resident individuals and Hindu Undivided Families (HUFs).

2.Since the tax deduction is not allowed for Non-Resident Individuals (NRIs), they cannot claim this deduction.

3.People who claim a deduction under Section 80U, which benefits people with disabilities directly, are not eligible for a deduction under Section 80DD.

4.Taxpayers who choose to file under the new income tax regime outlined in the Union Budget 2020 will lose the deduction under Section 80DD that they received under the previous scheme.

5.Disabilities covered to qualify for tax deduction under Section 80DD:

  • Mental illness - includes mental illnesses or disorders.
  • Any hearing impairment - refers to a hearing power of fewer than 60 decibels.
  • Autism - includes a person suffering from autism spectrum disorder.
  • Mental retardation - refers to someone with incomplete or partial mental development.
  • Any locomotor disability - includes joint or muscle disabilities resulting in restricted limb movement.
  • Blindness - includes lack of sight by 20 degrees or more, visual acuity less than 6160 with glasses or lens, or complete blindness.
  • Cerebral palsy - refers to a movement or posture disorder usually caused before or at birth due to abnormal brain development.
  • Leprosy-cured - includes people who have been cured of leprosy but continue to face challenges like loss of sensation, paresis in eyes, deformities, etc.
  • Low vision - includes a low vision that cannot be corrected with surgery.

Terms and Conditions to Claim Income Tax Exemption for the Physically Disabled Dependent

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

  • 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 Deduction for Physically Disabled Dependent

The following sum can be claimed as a deduction:

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

You can’t afford to leave your spouse, child, sibling, or parent’s future to chance if they have a disability. Term life insurance and other products of the kind can assist you in planning for and delivering much-needed tax advantages. Now is the time to choose a plan that meets your needs so that you can look after your loved one’s medical care, training, and rehabilitation costs without spending a fortune. Consult your financial advisor to determine the best insurance for your family’s future, and engage a tax specialist to determine how to optimize tax savings for disabled dependents.

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 taxes.

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