Income tax for the handicapped employee
An income tax is imposed on the income and the profits earned by an individual and other entities. In India income tax is levied by the central government through the Income Tax Department whose vision is to be with the nation to build a better future for all the country.
The government has included special provision for the individuals who have the disability in the Income Tax Act of 1961.
Special provisions for the specially-abled
The Income Tax Act, 1961, not only states provisions of tax collection but also states the tax exemptions and benefits to the individual. Sections 80U and 80DD describe the provisions for income tax for handicapped employees and benefits to be availed by them.
These sections of the income tax laws provide tax benefits for individuals if either they or any of their family members are suffering from certain disabilities. Under section 80U the tax exemption can be claimed by the person who is disabled and under section 80DD the tax exemption is claimed by the person who has a disabled family member.
What do you mean by tax exemptions?
Tax exemptions are the monetary benefits to be availed by the individuals and other entities to reduce their income tax levied. Tax exemption status may provide full relief from tax payment or will give you some relief on some taxable items.
The Income Tax Act provides tax exemptions on many grounds under different categories explained under different sections of the act.
Sections 80 DD and 80U are the sections of tax exemption, on the medical expenditure, of income tax for handicapped employees. Though their exemption might be the same, they cannot be availed simultaneously.
Deductions on income tax for handicapped employees can be availed on the medical expenses spent on the treatment of the disabled person under both sections i.e. section 80U as well as section 80DD.
What are the exemptions under section 80U?
Section 80U of the Income Tax Act allows deductions for medical expenses incurred for disabled persons. It is claimed by the person who is an Indian resident defined handicapped in medical terms. Under section 80U, a person with disabilities is the one who is medically certified with 40% disability. Such a person can claim the exemption. The individual has to present the medical certificate of the disability to avail of the exemptions allowed under the Income Tax Act.
List of disabilities
As per the Person with a Disabilities (Equal opportunities, Full Participation, and Protection of Rights) Act 1995 the disabilities are segregated into 7 sections for the purpose of income tax for handicapped employees, these sections are explained below:
- Low vision
The person is visually impaired which cannot be corrected with the help of surgery. But they can use their vision via other devices.
- Hearing impairment
If the person’s hearing power is below 60 decibels then they are included in this category.
When the person has a lack of vision by 20 degrees of an angle or has the visual acuity not more than 6160 after the use of a corrective lens.
- Mental illness
When the person has a mental illness or mental disorder. It does not include mental retardedness.
- Leprosy cured
This includes the individuals who have been cured by leprosy but whose hands and feet sensations are lost and have paresis in their eyes or eyelids.
- Locomotor disability
This includes disability of joint bones or muscles leading to strictly limited limb movement.
- Mental retardation
This includes an individual with incomplete mental growth resulting in a subnormal level of intelligence.
Deductions under section 80U
The amount of deductions under Section 80U of the Income Tax Act depends on the percentage of the disability of the handicapped person. For the purpose of income tax for handicapped employees, the following deductions are allowed:
- For persons with 40% disabilities – INR 75,000
- For persons with 80% disabilities – INR 1,25,000
Requirements for making a deduction under section 80U
The deductions on the income tax for handicapped employees under section 80U can be claimed when the following requirements will be completed. It must be noted here that the deductions will only be allowed for the time for which the following requirements will be fulfilled. If the nature of the disability is temporary in the nature, then the exemption will be allowed for that duration of time in that particular financial year only.
- The deduction can be claimed only if the individual suffers from the disability mentioned above.
- The percentage of disability should not be below 40% for claiming the disability.
- If a person is claiming a deduction for severe disability, then the disability percentage should not be at less than 80%.
- One should explain the type of disability according to the act to claim deductions on the taxable amounts.
- One should obtain the medical certificate stating the type of disability in the manner prescribed in form 10-IA.
- If the medical certificate of the disability got expired then no deductions are allowed.
- The medical certificate should be made and signed by a neurologist having a degree of medicine in neurology.
An Indian resident with more than 40% disability can claim the tax deductions under section 80U of the Income Tax Act, 1961. But it should be noted if the individual opts for the newly proposed tax provisions from the financial year 2020-21 then the deductions under section 80U will be available able for the old regime taxation system and the new regime taxation system.
The amount of the exemptions varies according to the percentage of the disability of the individual. Under section 80U the tax deduction can be claimed only by the individual who is disabled and on the medical expenditure for the concerned disability.
Although there may be a scenario when the medical expenditure is higher, it should be noted that the amount of the deduction will be the same as decided by section 80U and cannot be increased. As the tax exemption is in accordance with the percentage of the disability and not of the percentage of the expenses incurred in medical treatment.