Deduction in case of a person with disability

E.—Other deductions

154(1)

An individual, being resident in India, who is certified by a medical authority, at any time during the tax year, as a person with disability or person with severe disability, shall be allowed a deduction of seventy-five thousand rupees or one lakh and twenty-five thousand rupees, respectively, while computing his total income.

154(2)

The deduction under sub-section (1) shall be allowed only if all of the following conditions are fulfilled:––

• (a) the individual furnishes a copy of the certificate issued by the medical authority;
• (b) if the certificate specifies that the disability needs reassessment of its extent after a period stipulated in it, the deduction shall not be allowed for any tax year succeeding the tax year in which the certificate expires, unless a new disability certificate is obtained and submitted; and
• (c) the certificate referred to in clauses (a) and (b) of this sub-section shall be furnished in the form and manner, as prescribed, along with the return of income under section 263 for the tax year in which the deduction is claimed.

154(3)

For the purposes of this section, “disability”, “medical authority”, “person with disability” or “person with severe disability” shall have the same meanings as provided in section 127.

Explanation

Section Summary:

Section 154(1) provides a tax deduction for resident individuals in India who are certified as persons with disabilities or severe disabilities. The deduction amounts are ₹75,000 for a person with a disability and ₹1,25,000 for a person with a severe disability. This deduction is applied while computing the individual's total income, reducing their taxable income.

Key Changes:

1. Deduction Amounts: The section specifies fixed deduction amounts of ₹75,000 for disabilities and ₹1,25,000 for severe disabilities. This is a clear, quantifiable benefit compared to earlier provisions, which may have been less specific or subject to varying interpretations.
2. Certification Requirements: The section introduces stricter compliance requirements, such as the need for a valid medical certificate and reassessment if the certificate expires.

Practical Implications:

1. For Taxpayers: Individuals with disabilities or severe disabilities can reduce their taxable income by the specified amounts, potentially lowering their overall tax liability.
2. For Compliance: Taxpayers must ensure they have a valid medical certificate from a recognized authority and submit it along with their income tax return. If the certificate requires reassessment, they must obtain a new one before the expiration date to continue claiming the deduction.
3. For Authorities: The tax department will need to verify the validity of the medical certificates submitted, ensuring compliance with the prescribed form and manner.

Critical Concepts:

1. Disability and Severe Disability: These terms are defined under Section 127 of the Income Tax Act. A "person with disability" refers to someone with a specified level of impairment, while a "person with severe disability" refers to someone with a higher degree of impairment.
2. Medical Authority: The certificate must be issued by a recognized medical authority, as defined under Section 127.
3. Reassessment: If the disability certificate specifies a need for reassessment after a certain period, the taxpayer must obtain a new certificate to continue claiming the deduction.

Compliance Steps:

1. Obtain a Valid Certificate: Ensure you have a disability certificate from a recognized medical authority.
2. Check Expiry: If the certificate has an expiration date or requires reassessment, obtain a new certificate before it expires.
3. Submit with Tax Return: Furnish the certificate in the prescribed form and manner along with your income tax return under Section 263.
4. Maintain Records: Keep a copy of the certificate and any reassessment documents for future reference or audits.

Examples:

1. Scenario 1: Mr. A is a resident individual with a disability certified by a medical authority. He claims a deduction of ₹75,000 while filing his income tax return for FY 2023-24. He submits the disability certificate along with his return.
2. Scenario 2: Ms. B has a severe disability and claims a deduction of ₹1,25,000. Her certificate expires in March 2024, so she obtains a new certificate in February 2024 and submits it with her return for FY 2024-25 to continue claiming the deduction.

This section simplifies the process for individuals with disabilities to claim tax benefits while ensuring compliance through proper documentation and certification.