Differently abled need a fairer treatment under the new tax regime

Since its introduction from the financial year 2020-21, the new ‘simplified’ tax regime has seen a few amendments. Under the new regime, while concessional slab rates are available to income up to Rs. 15 lakh, various exemptions be it for HRA, LTA have to be foregone. A majority of deductions available under Chapter VI-A, say for investments in a PPF (section 80C) are also not available. Even the deduction otherwise available to the differently abled under section 80U is denied.

Deduction limit under section 80U
Under section 80U of the Income-tax (I-T) Act (applicable only under the old tax regime) some monetary respite is available to individuals with disabilities, depending on the degree of their disability, by offering a deduction against their total income.

·For disability between 40-80% the maximum deduction allowed is Rs. 75,000

·In cases of severe disability (80% or more) the deduction limit increases to Rs. 1.25 lakh

A range of disabilities (set conditions are prescribed) are covered by this section, which include blindness, visual impairment, deformities arising owing to leprosy, locomotion disability, mental retardation, mental illness and multiple disabilities (combination of two or more disabilities in these specified categories). For a claim under this section a medical certificate from a recognized medical authority, specifying the nature and percentage of disability is required.

Is denial of this deduction under the new regime fair?
The question that is being asked is whether denial of a deduction under section 80U under the new regime is fair?

The Bombay Chartered Accountants Society (BCAS), a voluntary organization of chartered accountants, in its pre-budget memorandum states: Many disabled individuals need to purchase assistive devices or employ the services of an attendant or assistant to help them in their daily living activities and in their work.

For example, blind individuals need to purchase screen reading software to work on computers, employ readers for reading hard-copy documents etc.

The government has introduced the new tax regime and has given indications that it is the preferred tax regime. Unfortunately, by denying deductions under section 80U, the new tax regime has greatly disadvantaged the disabled taxpayers. In fact, even the amount of deduction available, which was set more than ten years ago, needs to be revised upwards, states BCAS.

Vishesh Sangoi, partner at DPS & Co, a firm of chartered accountants points out that the Memorandum to the Finance Bill, 2016, which had revised the deduction limit had pointed out its necessity. “The government had clearly acknowledged the fact that the medical costs have been increasing and the needs of disabled people need to be given special emphasis. By taking away these deductions under the new tax regime, an ordinary person and a person with disability stand on the same footing as far as income tax is concerned,” said Sangoi.

He adds, “Deduction u/s 80U, which is aimed at providing financial relief to individuals with disabilities, is fundamentally different from investment-based tax breaks. Unlike deductions under sections 80C or 80D, which incentivize savings and insurance investments, section 80U offers a flat deduction directly addressing the additional costs incurred due to disability. This essential support is not available under the new tax regime with its lower rates, making it crucial to understand that such deductions serve distinct purposes and should not be compared. The choice between tax regimes must consider the unique benefits that deductions like Section 80U provide, beyond mere tax savings. Inclusion of these deductions would not only provide equitable tax relief to taxpayers but also uphold the principles of fairness and inclusivity in our tax system.”

Keeping in view the ground realities, BCAS has also suggested that an additional allowance of at least Rs. 50,000 in the nature of ‘care-giver allowance’ or ‘assistive devices allowance’ should be allowed to disabled individuals.

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