One of the positives of Budget 2022 was the change in tax rules for insurance policies bought by parents or guardians to take care of a differently abled dependant. If you, as a parent or guardian of a differently abled individual, had taken insurance for the maintenance of your ward, the existing provision of Section 80DD of the Income-tax Act allows tax deduction on the premium you pay for the scheme. But there’s a condition—the tax benefit is available only if the differently abled dependant, who is the beneficiary, gets the lump sum or annuity in the event of the death of the proposer (parent or guardian). Budget 2022 has changed this.
“It is now proposed to allow the deduction of policy premium even where the payment of annuity or lump sum amount to the disabled dependant is made during the lifetime of the proposer (parent/guardian), i.e. upon (the proposer) attaining the age of 60 years or more and the payment or deposit to such scheme has been discontinued,” says Vivek Iyer, partner, financial services, Grant Thornton Services, an accounting and advisory organisation.
Further, the amount thus received by the differently abled dependant (during the lifetime of the parent or guardian) will not be deemed to be income of the parent or guardian.
“The change simplifies things and reduces the number of terms and conditions therein,” says Anant Ladha, founder, Invest Aaj For Kal, a financial planning firm. Some of the policies available as of now are whole-life plans that are used as long-term annuity plans after the demise of the life assured and the death benefit is paid partly in lump sum and partly in installments.
Essentially, if you plan to buy a fresh policy for a disabled dependant, take note of two points. One, the purpose of the policy has to be maintenance of a dependant who is a person with disability. And two, the scheme should provide for payment of annuity or lump sum to the dependant in the event of the parent or guardian attaining the age of 60 years.