Important Keyword: Chapter VI-A, Indian Resident, Section 80U.

Section 80U: Deduction for Individuals with Disability

The government consistently endeavors to enhance the quality of life for differently-abled individuals through dedicated schemes and programs. These initiatives aim to provide financial assistance and support, including through the Income Tax Department’s (ITD) special provisions under Chapter VI-A of the Income Tax Act. One notable provision is found under Section 80U, specifically designed to offer deductions to individuals with certain disabilities.

What is Section 80U?

Section 80U of the Income Tax Act 1961 stands as a significant provision aimed at supporting individuals with disabilities in managing their financial affairs effectively. This incentive specifically targets residents who face physical or mental impairments, offering them vital tax benefits. These deductions can be claimed when filing Income Tax Returns (ITR) under Chapter VI-A.

Which disabilities fall under Section 80U deduction?

Section 80U of the Income Tax Act 1961 provides an opportunity for individuals affected by specific disabilities to claim deductions. These disabilities include autism, cerebral palsy, blindness, low vision, cured leprosy, hearing impairment, locomotor disability, mental retardation, and mental illness. This provision aims to support and empower disabled individuals by offering financial relief through the tax system, thereby fostering greater financial inclusion and support across diverse communities.

What are the Conditions to Claim 80U Deduction?

To claim a deduction under Section 80U of the Income Tax Act 1961, several conditions must be met by the taxpayer:

1. Resident Indian: The taxpayer must be a resident of India as per the Income Tax Act provisions.
2. Minimum Disability Requirement: The taxpayer should be suffering from a disability of at least 40%, certified by medical authorities.
3. Independent Individual: Unlike Section 80DD which applies to dependents, Section 80U applies to individuals who are independent in managing their affairs.
4. Medical Certificate: The taxpayer needs to possess a valid medical certificate issued by competent medical authorities identifying them as a ‘person with disability’.
5. Flat Deduction: Unlike Section 80DD, which considers actual expenses incurred, Section 80U provides a flat deduction based on the severity of the disability. Therefore, the amount of expenses is not relevant for claiming this deduction.

These provisions aim to support disabled individuals financially, ensuring they receive necessary relief through the tax system, regardless of the specific expenses they may incur due to their disability. It promotes inclusivity and supports the financial independence of individuals with disabilities in India.

According to Section 80U of the Income Tax Act 1961, individuals with disabilities are categorized based on the severity of their condition:

1. Disabled Individual: An individual who is certified to have a disability of at least 40% by a competent medical authority.
2. Severely Disabled Individual: An individual who is certified to have a disability of at least 80% by a competent medical authority.

Deduction Limits:

• For Disabled Individuals (40% or more disability): The deduction allowed is ₹75,000 per annum for each assessment year.
• For Severely Disabled Individuals (80% or more disability): The deduction allowed is ₹1,25,000 per annum for each assessment year.

These deductions are subtracted from the individual’s gross total income, reducing their taxable income and thereby providing financial relief through the income tax system. It’s important for eligible individuals to obtain a disability certificate from designated medical authorities to avail of these deductions while filing their income tax returns.

Tax deduction under section 80U is as follows:

Note: If the taxpayer opts for the new tax regime, a deduction under section 80U is not allowed.

Let’s illustrate how Ankit can claim a deduction under Section 80U for the financial year 2021-22:

Example:

Ankit, who suffers from a hearing impairment, has been certified with a disability of 40% by a medical authority. During the financial year 2021-22, his earnings from salary amounted to ₹5,20,000.

Solution:

According to Section 80U:

• Ankit, being a disabled individual (40% disability), is eligible for a deduction of ₹75,000.

Calculation:

Ankit’s taxable salary = ₹5,20,000

Deduction under Section 80U = ₹75,000

Revised Taxable Income:

Taxable Income = ₹5,20,000 – ₹75,000 = ₹4,45,000

Tax Benefit:

By claiming this deduction, Ankit reduces his taxable income from ₹5,20,000 to ₹4,45,000. This reduction in taxable income results in a lower tax liability, thereby providing financial relief.

ITR Form Applicability:

Ankit can claim the deduction under Section 80U while filing his Income Tax Return (ITR). He may use any of the applicable ITR forms (ITR 1, ITR 2, ITR 3, or ITR 4) based on his income sources and other relevant factors.

Supporting Documents:

Alongside the usual documents required for filing ITR (such as Form 16, PAN card), Ankit must also submit:

• Form 10-IA (Certificate of Medical Authority) confirming his disability. This form can be obtained from the Income Tax Department’s website or from the medical authority that issued the disability certificate.

The certificate of disability that is provided by the Medical Authority has an expiry date. If the validity of the certificate expires within a financial year, deductions can be claimed by showing the expired certificate. However, one will need a new certificate to claim deductions for the next financial year.

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Official Income Tax Return filing website: https://incometaxindia.gov.in/