Budget 2022 offers additional tax concessions to the differently abled: Here are the details

Such insurance policies pay the differently-abled dependents either a lump-sum or regular income in the form of annuity. The tax benefit is allowed only if the dependent receives the sum after the parent or guardian’s death. That is, if the differently-abled dependent were to die before the parents or guardians, the premium paid until then is treated as the policyholder’s income and taxed in the year when proceeds are received. Budget 2022 has relaxed now this provision.

The FM announced that the tax break will now be allowed even if the proceeds are received during parents’ lifetime, but after they turn 60. “This allows differently-abled individuals to benefit from an insurance policy bought by their parent or guardian for them in a more assured manner. This will go a long way in helping differently abled dependents gain financial independence as earlier, the dependents would only get the annuity upon the parent or guardian’ death,” says Sarbvir Singh, CEO, Policybazaar.com.

Why is Section 80DD important?

Section 80DD is meant to provide relief to tax-payers – parents or other guardians – taking care of medical treatment, training and rehabilitation of differently-abled dependents. Guardians include spouse, children, parents, brothers and sisters.

For instance, those suffering from locomotor’s disability, impaired vision, leprosy, cerebral palsy, autism and so on. If they pay or deposit any amount under an insurance policy or any other specified scheme, they can claim a tax deduction of up to Rs 1.25 lakh. That is, in case of severe disabilities of over 80 percent.

In case of less severe disabilities (over 40 percent), this tax benefit is restricted to Rs 75,000. The disability and severity have to be certified by a government hospital. However, if the differently-abled individual herself is already claiming similar deductions under section 80U, this tax break will not be available to the parents or guardians.

What are the tax breaks that a differently-abled individual can claim?

Section 80DD is meant for parents or guardians, while section 80U is applicable to the differently-abled individuals themselves. The rules are similar. If you incur expenses on medical treatment for your disabilities, you can claim a deduction of Rs 75,000-1.25 lakh. That is, like in case of section 80DD, if the disability is over 40 percent, the deduction limit will be Rs 75,000. Those with severe disabilities – of over 80 percent – will be eligible for higher deduction of Rs 1.25 lakh.

What if she spends less or more than the deduction limit mentioned?

The actual expenses do not count. “This is a flat deduction and does not depend on actual amount spent. However, the disabled person should be wholly or mainly dependent on the taxpayer for maintenance and should not have claimed deduction for disability under Section 80U separately,” says Suresh Surana, Founder, RSM India, a tax consultancy firm. So, even if the differently-abled individual or her dependents’ actual expenses do not breach this limit, they can still claim Rs 75,000 or Rs 1.25 lakh as deduction.