Income tax benefits persons with special needs and caregivers can avail

Taking care of a child with special needs can be an emotional as well as financial roller-coaster. A lot of times, they require additional support in the form of special education or full-time care or equipment to make their lives relatively easier. Providing for all this can often be a financial drain on parents or guardians. In all this, the government of India does a small bit to support such children and their caretakers by offering certain tax benefits. 

Section 80U of the Income-Tax Act, 1961 gives tax benefits to individuals who are differently abled, while Section 80DD to an individual who supports a family member or dependant with special needs. In case of an individual taxpayer, the dependant could be his spouse, children, parents or siblings. For Hindu Undivided Families or HUFs, it could be any member of the HUF. 

Section 2(i) of the Persons of Disabilities Act, 1995 defines disability as any person with blindness, low vision, leprosy-cured, hearing impairment, Loco motor disability, mental retardation, and mental illness. The Section also covers individuals with severe disability which includes conditions such as multiple disabilities, autism and cerebral palsy. 

While the Act offers deductions, the amount that you can claim depends on the degree and kind of disability. 

Section 80U: Any citizen of India who is certified as a person with disability or severe disability by a recognised medical authority can claim tax benefits under Section 80U. A deduction of ₹ 75,000 is allowed for an individual with disability under 80% and ₹ 1.25 lakh can be claimed by an individual with any severe disability. Other than the certificate of disability and return of income, no other documents are required to avail this benefit. 

Section 80DD: You can claim a fixed deductible amount of ₹ 75,000 if the dependant’s degree of disability is more than 40% but under 80%. If the disability is over 80%, a fixed deduction of ₹ 1.25 lakh can be claimed. These deductions are independent of the actual expenditure incurred by you. Say, you’ve spent ₹ 15,000 for the disabled individual’s treatment, then you can still claim a deduction of ₹ 1.25 lakh if his disability is over 80%. Note than the caretaker or the taxpayer cannot claim these deductions if the dependant has claimed a deduction under Section 80U. Tax benefits cannot be availed if the degree of disability is below 40%.

If the taxpayer has made a deposit with an insurer, or any other scheme for the maintenance of the dependant, and the dependant dies before the taxpayer, the amount deposited can be received by the taxpayer (caretaker) as an income which is subject to taxation.