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The Income Tax Act, 1961 allows deductions from the total gross income, before charging the tax, in case medical expenditure has been made on the treatment of a differently-abled person. Section 80DD and Section 80U of the Income Tax Act, 1961 deals with the medical expenses incurred for specially-abled persons. Section 80U offers tax benefits if an individual suffers a disability himself/ herself, whereas Section 80DD offers tax benefits if an individual taxpayer’s dependent family members suffer from any disability. In this article, we shall discuss the tax benefits prescribed section 80U of the Income-tax act.
According to Section 80U of the Income Tax Act, 1961, individuals who have a disability can claim tax deduction while filing their income tax returns. The disabled person must be recognized by medical authorities to become eligible for tax deductions. The taxpayer here should be a resident individual and also must prove 40% disability from a recognized medical authority.
As prescribed under section 80UA, a resident individual who is certified as a person with a disability by the medical authority can claim tax benefit under this section. A person with a disability is a person who has at least 40 per cent disability, certified by the medical authorities.
For the purposes of this section disability has been explained as one of the following:
Low vision applies to individuals with visual function impairment that cannot be cured by any medical procedure still they are capable of using their vision with the help of different gadgets.
When a person suffers from any of the conditions which are mentioned below, falls under this criterion:
Any mental disorder other than retardation comes under the definition of mental illness.
Loco motor disability” is a disability of the bones or joints muscles which may restrict the movement of the limbs or any form of cerebral palsy.
A state of arrested or incomplete development of the mind of a person which is especially characterized by subnormality of intelligence is mental retardedness.
“Hearing impairment” means loss of sixty decibels or more in the conversational range of’ frequencies.
Leprosy cured person” is any individual who has been cured of leprosy but is suffering from
Any person is having more than one disability of the above.
A person suffering from 80% or more of one or mare disabilities comes under the definition of severe disability.
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Tax deductions under Section 80U of the Income Tax Act, 1961 is Rs. 1.25 lakhs in case of severe disabilities and Rs.75, 000 for individuals with disabilities.
|Type of Disability||Amount to be deducted under Section 80U|
|Severe Disability||Rs.1.25 lakhs|
You can better understand this with the help of this illustration:
In case the taxpayer’s aggregate income is Rs. 20 lakhs and he suffers from a 60% disability, he can avail a deduction of Rs. 75,000 which will reduce his total gross income to Rs. 19.25 lakhs. The computation of the tax liability will change.
Below mentioned, medical authorities are eligible to issue a medical certificate:
Disabled persons many times have additional medical expenses because of the disability they suffer. They also have to spend a vast amount of money on medical treatments and facilities, which will enable them to lead a healthier life. These expenses are extra expenditure into their incomes and taxing them on their total income will not at all be fair. That is why the tax deduction is allowed on their aggregate income which helps in reducing the income chargeable to tax. As the income is reduced, the tax liability also gets reduced, giving a respite to the disabled tax-payers tax relief.
Both sections 80DD and Section 80U provides a deduction based on disability or severe disability. The main difference between the two sections is that section 80DD delivers a deduction to a taxpayer in case any of the dependent family members such as spouse, parents, children, and siblings are suffering from a general disability or severe disability. However, section 80U provides a deduction to an individual himself suffering from a general disability or severe disability.
Claiming deduction under section 80DD is possible when any dependent family member has a disability or severe disability; however, claiming deduction under section 80U is possible when the individual himself has a disability. Only in the case when both a dependent family member and an individual himself have a disability, claiming deduction under both section 80DD and 80U gets possible.
The deduction amount given under section 80U is a lump sum amount, regardless of how much expenditure is made on the treatment, which in many ways is unfair for the disabled persons. As Section 80U provides tax deductions only for persons with 40% disability, the person having disability level below this are left out. Section 80U of the Income Tax Act provides a deduction to an individual who is certified by the medical authority to be a person with a disability or person with a severe disability. No medical bills or insurance premium receipts are to be submitted to claim income tax benefits.