An Indian citizen pays tax to help in the betterment of the country. The amount collected is useful for multiple things like building infrastructure, medical expenditure, education, etc. Where various types of taxes are imposed on a taxpayer, he/she also has an option to claim some of this amount (tax benefit) back from the government under various sections of the Income Tax Act.
In this article, we will focus on health insurance tax benefits for specially-abled individuals. This is a group of people that may require special medical care and attention. Their needs are slightly different from others. Read on to know all about how you can claim a tax benefit if you have a differently-abled person dependent on you.
How is disability defined?
In India, we follow the Persons with Disability (Equal Opportunities, Protection of Rights and Full Participation) Act, 1955 that is applicable to people with disabilities in the Asian & Pacific Region. This act allows us to give equal opportunity in life to people who are differently-abled. A person should at least suffer 40% impairment to be considered under this act.
- Cerebral Palsy
- Hearing Impairment
- Leprosy (cured)
- Locomotor Disability
- Low Vision
- Mental Illness
- Mental Retardation
A person suffering for more than one kind of disability will be considered as severely disabled. Also, those who suffer more than 80% of the impairment are also referred to as severely disabled.
What are the limits of tax benefits?
As mentioned earlier, the percentage of disability suffered by a person matters. Tax benefits are calculated based on the percentage of disability suffered. If a person suffers more than 40% but less than 80% disability, he/she can claim a deduction of Rs. 75,000 in one financial year. Beyond 80%, a benefit of Rs 1.25 lakh can be claimed. This limit is irrespective of the actual expenses incurred.
What are the sections for tax benefits for a specially-abled person?
The tax structure to be followed by a differently-abled person is defined as a deduction under section 80DD and 80U of the Income Tax Act. This act defines the working of medical expenditure and tax for a disabled person.
The difference between these two sections is that a person can claim a tax deduction under section 80DD if he/she has spent money on the medical treatment, training or rehabilitation of a disabled dependent of a differently-abled person. Whereas under section 80U, the differently-abled person him/herself can get a tax benefit for any related medical expenses.
One may also claim health insurance tax benefit under section 80DD when a premium is paid against a health insurance policy. Health insurance tax benefit under section 80DD covers dependents like spouse, children, parents (or in-laws) and siblings of the taxpayer. One needs to buy a disability insurance policy that covers the medical needs of a differently-abled person in order to claim tax benefits. The disabled person should be fully or majorly dependent on the taxpayer.
Which documents are required to claim tax benefits?
To claim tax under section 80DD, one needs to produce the following set of documents:
- Medical Certificate
A copy of the medical certificate that describes the nature and extent of the disability suffered.
- Form 10-IA
This document will be required in case of autism, cerebral palsy or multiple disabilities.
- Self-Declaration Certificate
One needs to declare expenses incurred on the medical treatment (including nursing, rehabilitation, and training) of a differently-abled person dependent on the taxpayer.
- Receipts of Insurance Premium Paid
One needs to submit the receipt of premium paid towards disability insurance in original when claiming a tax benefit.
Note that other than the receipt of disability insurance, documents can be copies of original receipts.
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