In Budget 2022, Finance Minister Nirmala Sitharaman announced tax relief for people with disabilities. She said that now the parent or guardian of a differently-abled person could take an insurance scheme for such a person. “The present law provides for a deduction to the parent or guardian only if the lump-sum payment or annuity is available to the differently-abled person on the death of the subscriber, i.e. parent or guardian,” the minister said in her Budget speech on Tuesday.
Sitharaman proposed to allow the payment of annuity and lump sum amount to the differently abled dependent during the lifetime of parent/guardian attaining the age of 60 years. “There could be situations where differently-abled dependants may need payment of annuity or lump sum amount even during the lifetime of their parents/guardians. I propose to thus allow the payment of annuity and lump sum amount to the differently-abled dependent during the lifetime of parents/guardians, i.e., on parents/ guardians attaining the age of sixty years,” said Sitharaman.
The move is an empathetic and thoughtful step on the government’s part, say experts. “It allows for differently abled individuals to benefit from an insurance policy bought by their parent/guardian for them, in a more assured manner. Moreover, this will go a long way in helping differently abled dependents gain financial independence. Earlier, the dependents would only get the annuity upon the death of the parent/ guardian. In an empowering move, the government has recognized that the dependents might need the money while the policyholder is still alive. It shows that the country is moving in the direction of financial inclusion,” says Sarbvir Singh, CEO, Policybazaar.com.
In addition to giving a boost to financial independence, the measure will give a much-needed push to insurance penetration in the country and further the goal of providing financial security for each household in India, adds Singh.
What’s Different Here?
Earlier, Section 80DD of the income tax Act provided for tax deduction for the parent or guardian only if the lump sum payment or annuity was available to the differently abled person on the death of the subscriber i.e., parent or guardian. Now the parents/guardian can claim the deduction even if the lump sum payment or annuity is received after 60 years.
Tax deduction was not available for situations in which the policy matured when the subscriber (parent or guardian of differently abled person) attained the age of 60. “Hence, to remove the hardship, this has also been included in the condition for availing deduction. It is also provided that the amount received by the dependent on such maturity shall not be taxed in his/her income,” says Sandeep Sehgal, partner-tax, AKM Global, a tax and consulting firm.
What To Keep In Mind?
The policy for disabled children should be under a scheme framed by the LIC or any other insurer or the administrator of specified company for the maintenance of the dependant. The scheme should provide for payment of annuity or lump sum amount for the benefit of disabled child in the event of parents/guardian attaining the age of 60 years.
