The Income Tax Act has introduced certain sections for the benefit of specific individuals. This helps to reduce the overall tax burden for those individuals. One such section is Section 80U. Section 80U is focused on persons with disabilities. Section 80U reduces the tax liability of individuals with disabilities.
This article will help you understand Section 80U of the Income Tax Act and how eligible individuals can benefit.
What is Section 80U?
As per Section 80U of the Income Tax Act 1961, if a resident individual has been certified disabled by any authorised medical authority, then they can claim tax deductions. A person with a disability can claim a deduction of ₹75,000. A person with a severe disability can claim a deduction of ₹1,25,000.
Now, to understand who can be classified as a disabled person, you need to understand these basic clauses:
- A person must have at least 40% disability.
- A person with a severe disability must have 80% disability.
Thus, if you wish to claim your deduction under Section 80U, you need to submit a copy of a medical certificate in the prescribed format at the time of filing an income tax return.
Definition of Disability as per Section 80U of the Income Tax Act:
Persons with Disability (Equal Opportunities, Protection of Rights and Full) Act, 1995 specifies that a person who has been certified by the medical authority with 40% disability is defined as disabled.
This includes the following types of disabilities:
Any individual who has very limited vision, with a lack of sight by 20 degrees, or whose vision is not above 6160 even after the use of lenses, is categorised in this disability category. Any individual with the above-mentioned conditions is eligible for tax exemption under this section.
- Minimal Vision:
Minimal vision is a condition when a person has a vision impairment that is incurable even after surgery. But they can use their vision with the help of specific devices. This is a permanent condition and irreversible. So, people with minimal vision are also classified as disabled and can qualify for a tax exemption under Section 80U.
- Leprosy Cured:
This includes people who have suffered from leprosy in the past but have recovered now. But if a person is facing problems in functioning their eye, hand or feet, they are defined as disabled under the Persons with Disability Act 1995. They qualify for a tax exemption under Section 80U.
This also applies to individuals and senior citizens who have severe deformities due to which they can’t work anymore and thus earn their own living.
- Hearing impairment:
An individual with a hearing impairment is considered as disabled if his hearing capacity is restricted to 60 decibels.
- Locomotor disability:
Individuals who suffer from disability in their legs fall under Section 80U. Disabilities regarding bones, muscles and joints also fall under this category.
- Mental retardation:
Individuals with limited or incomplete mental development fall under this disability category. This is an intellectual functioning disorder wherein the disabled individual cannot perform daily activities on his own and needs assistance. So, all individuals suffering from this ailment can surely claim a tax exemption under Section 80U.
Autism Spectrum Disorder (ASD) is a case of developmental disorder wherein the differences are caused only in the brain. Autistic people have social anxiety or poor social interactive skills and often have repeated behaviours with restricted interaction. They have concerns about paying attention for a longer duration and have different learning methods. So, people with autism can claim a tax exemption under Section 80U.
- Cerebral palsy:
This disorder of movements usually appears in the very early stages of childhood. Poor muscle coordination, stiffness, tremors, etc., are common symptoms of this disorder. Individuals with cerebral palsy have concerns with sensation, listening, speaking and vision. Individuals with CP or cerebral palsy can claim a tax exemption under Section 80U.
- Mental illness:
Mental disorder apart from mental retardation is defined as a disability as per the Persons with Disability Act 1955. There are multiple categories of mental ailments which are classified under this Act, and individuals meeting the criteria can claim a tax exemption under Section 80U.
In addition to the above-mentioned disabilities, this section also covers severe disabilities. Individuals who have multiple disabilities, such as autism and cerebral palsy, are categorised as having a severe disability.
Benefits of Section 80U
- This section reduces the tax liability of disabled persons.
- Disabled individuals can save money by getting tax deductions under this act.
- You don’t have to provide a lot of documents to claim a deduction under this act. Only a medical certificate is required.
- It also covers individuals suffering from autism, cerebral palsy etc.
Drawbacks of Section 80U:
- The deduction allowed is very small. So disabled individuals with high incomes may not benefit greatly from this section.
- A person who may not be disabled as per the provisions of the act may claim a deduction by presenting a fake medical certificate.
- Disability covers the variety of disabilities caused by various illnesses, disorders, etc. At times, defining the disability is a concern for a medical doctor also.
Who is Eligible to Claim Deduction under Section 80U?
An individual certified by a medical authority to be a person with a disability is eligible to file a claim for a deduction under this section. Only a resident individual can get the benefit. NRIs don’t qualify for this deduction.
What requirements are needed to claim a deduction under Section 80U?
The requirements to claim deductions under this act are minimal. You just need to submit a medical certificate which certifies the disability. It should be issued by a recognised medical authority or concern in Form 10-IA. There is no need to produce any medical bills incurred during the treatment of the disability.
Medical authorities can provide a medical certificate of disability. They can be –
- A neurologist with a degree of MD (Doctor of Medicine) in Neurology
- A neurologist specialising in paediatrics with a relevant qualification (for children)
- A civil surgeon
- A Chief Medical Officer (CMO) in a government hospital
The deduction can be claimed by filing income tax returns as per Section 139 of the assessment year, along with a medical certificate mentioning the disability. In case of the expiry of the certificate, you can still claim the deduction. But you need to produce the fresh certificate in the subsequent year to claim the benefit.
At times, the disability may be temporary. It requires re-assessment at certain time intervals. In such a case, the certificate’s validity is calculated from the start of the assessment year in which the certificate was issued. It ends in the financial year in which the certificate would expire.
How does Section 80U differ from Section 80DD?
This is a common question most people have. However, you need to understand that the basic purposes of both sections are completely different. Section 80DD and Section 80U deal with benefits for disability, but both sections differ from each other. You can claim a tax deduction under Section 80DD for the kin and family members of the taxpayer if they have any kind of disability. On the other hand, Section 80U provides a tax deduction to an individual taxpayer who has a disability.
Section 80DD of the Income Tax Act is applicable if a taxpayer pays an insurance premium to care for disabled dependent members. The deduction limits in Section 80DD and Section 80U are the same. Dependents in Section 80DD are defined as the siblings, parents, spouses and children of an assessee or a member of Hindu Undivided Families.
Section 80U provides deduction benefits to an individual having a disability and severe disability.
How does Section 80U Differ from Section 80DDB?
Under Section 80DDB, deductions are allowed on expenses incurred on the medical treatment of the dependent suffering from any diseases specified in the section. Section 80DDB doesn’t give direct benefit to the person suffering from the specified disease but the family member or kin who has incurred medical expense on the dependent’s treatment gets the benefit.
Section 80U gives the direct benefit of tax deduction to the individual taxpayer who has a disability.
Under Section 80DDB, deduction depends on seniority. A regular taxpayer who incurred expenses for treatment of their dependent with a specified disease will get a tax deduction of up to ₹40,000. If the taxpayer is a senior citizen or a super senior citizen, then they can get a deduction of up to ₹1,00,000.
Frequently Asked Questions
Is any proof required for Section 80U claims?
The person only needs to submit a medical certificate issued by an authorised person in Form 10-IA at the time of filing an income tax return. No other proof is required.
Is it possible to claim deductions under both Sections 80DD and 80U?
Both Sections 80DD and 80U provide a deduction for disability. However, you cannot claim deductions for both sections simultaneously.
What is the maximum deduction available under Section 80U for severe disability?
The maximum deduction that a person with a severe disability can get under Section 80U is ₹1.25 lakhs.
Is Section 80U applicable in the new tax regime?
The Budget 2020 launched a new tax regime under which individual and HUF taxpayers can pay income tax at a lower rate. This is applicable from 1st April 2020. Deduction under Section 80U continues even after the introduction of the new tax regime.
Is paralysis covered under Section 80U?
As per Circular No 246 (dated 20th September 1978), an assessee who suffers from permanent disability due to paralysis can claim tax deductions of ₹5,000.
Animesh Gupta is a Chartered Accountant by profession and a NISM certified Mutual Fund Expert. He has over 4+ years of experience working in the Financial Services Industry. In his role at Wintwealth, he is part of the Credit and Risk team and evaluates the risk of the bonds available on Wintwealth's platform.