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In India, disabled individuals are eligible for certain tax benefits under section 80U of the income tax act.
Depending on the extent of disability, a person can qualify as either with a personal disability or a severe personal disability.
Personal disability: Individuals who suffer from at least 40% disability can deduct up to ₹50,000 from their taxable income.
Severe personal disability: Individuals who suffer from more than 80% disability can deduct up to ₹100,000 from their taxable income.
Individuals who qualify for disability allowances can deduct a lump sum from their taxable income even if they spend less than the allowed amount.
Example 1: Let's say a person with severe disability spends ₹65,000 in a year on their medical expenses. However, he can deduct the entire allowed amount of ₹100,000 from the taxable income.
The following qualify as 'disability' for tax purposes:
The disability allowances are available only for individuals and not for NRIs or HUFs.
Note that the benefit under section 80U is different from the one under 80DD. Section 80DD is applicable for medical treatment of handicapped dependants, while section 80U is applicable for individuals who themselves have a disability.
For getting disability allowances, individuals should submit a disability certificate from either a state or a central government institution. If the disability certificate has expired, individuals cannot claim a deduction until the certificate is renewed. There is no need to submit any bills or receipts to the government. However, for mental illnesses, there is a need to submit additional forms.
Use our tax calculator to see how disability allowances impact tax payable.