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Resource id #3 Tax incentives and deductions under Income Tax Act, 1961, under review; Disabled people targetted - Volume 4 Issue 12: Disability News and Information Service for India

Feature

Volume 4 Issue 12 - June 15, 2006

Tax incentives and deductions under Income Tax Act, 1961, under review; Disabled people targetted

The Department of Revenue, Central Board of Direct Taxes, Tax Policy & Legislation Division under the Ministry of Finance has targetted disabled people and their parents in its latest exercise the department terms “review” of various tax incentives and deductions under the Income Tax Act, 1961. Chitra S. Shankar critically examines the move of the Government that could affect thousands of disabled people and their families.

The concerned division of the Department of Revenue, in a quiet announcement on the department’s own website, has stated that various tax incentives and deductions under the Income Tax Act are being reviewed, and in this regard it would like to invite comments “with supporting rationale” for their removal or continuance.

But the manner in which the notice has been put up leaves much to be desired. The notice states that “the Government is keen to involve all stakeholders in this exercise.” If it is so keen, how come no one has heard of this quiet exercise? Even D.N.I.S. got this information very late. If the concerned department was genuinely looking for views, the announcement should have been duly published. Views of N.G.O.s and parent groups should have been solicited. Disability rights groups should have been informed.

Speaking to veterans in the disability sector, D.N.I.S. found that most of them were not even aware of this so-called “review”. Subhash Datrange, Association for Blindness & Low Vision, Mumbai, and Rajul Padmanabhan, Vidya Sagar, Chennai said they could not comment on the move as they were unaware and had not got any information regarding the same. Nirmala Srinivasan, Acmiindia, Bangalore came to know of it very late and this is what she had to say: “The circular comes as a major threat to persons with disabilities, and their family care givers like me.”

As regards content of the notice, the first question that comes to mind is Why? What rationale or logic lies behind the review of the existing tax deductions for disabled people and their parents?

Looking at the history of the income tax deductions for the disabled, one can see that an amount of only Rs. 20,000 was allowed under Section 80U until 1995. This was the year when the Disability Act was passed. Without wasting any time, Disabled Rights Group (D.R.G.) took the initiative to meet Manmohan Singh who was the Finance Minister then, and convinced him regarding the need for an increase in the existing amount. As a result, the deduction from the total income of a disabled person was raised from Rs. 20,000 to Rs. 40,000 the same year.

Again, in 2002, when Jaswant Singh was the Finance Minister during the N.D.A. rule, D.R.G. met him and demanded that the tax deduction be raised to Rs. 100,000. The Government yielded partially to the demand and created two slabs. The tax deduction amount was raised to Rs. 50,000 for all disabled people, and to Rs. 75,000 for people with severe disability (above 80 per cent).

At present, there are three sections under which disabled people and/or their parents are eligible for tax deduction. One is 80-DD with deductions of Rs. 50,000 where any expenditure is incurred for the medical treatment of a dependent being a person with disability. In case of severe disability, there is an enhanced deduction of Rs. 75,000. Under section 80-DDB there are deductions up to Rs. 40,000 against expenses actually incurred on medical treatment of specified diseases and ailments. In case of senior citizens, enhanced deduction of Rs. 60,000 is available. Under section 80-U a deduction of Rs. 50,000 is given for an individual being a person with disability, and in case of severe disability, enhanced deduction of Rs. 75,000 is available.

The expenses incurred by a disabled person are several times more than of any ordinary person. In addition to normal expenses that all citizens incur in the course of their life, other expenses in the life of a disabled person on a regular basis include medical care, purchase and maintenance of aids and appliances, salary of attendants, extra transportation cost and so on. And all these expenses have to be met by the disabled people from their own income, or from the income of their parents, which makes these income tax deductions so important for them.

Now, suddenly, these deductions have been put under the scanner of the Ministry of Finance! And, of course, the authorities make it sound so innocuous! When comments were sought from the concerned official in the Ministry, Vandana Ramachandran, Under Secretary (TPL-I), had this to say: “From time to time we have put up things on our website. There is a public debate going on, on various issues, and this is also part of the exercise. We have not targetted disability. This is just one of the issues.”

What is the logic behind this shocking idea? And from where did this suddenly originate? No answers! But with this one move, the onus is now on disabled people and their parents to give “supporting rationale” as to why these three deductions should be continued and as to why they should not be stopped or removed!

It is about time that the disability sector, its N.G.O.s, various disability groups, parent groups and associations, and above all – disabled people themselves woke up to this quiet but rather dangerous move on the part of the Finance Ministry. If the three deductions (or any one of them) were to be withdrawn, it will affect the lives of hundreds and thousands of disabled people and their parents.

The following is an extract from the said notification:

F.No. 149/124/2006-TPL (Pt.)

Department of Revenue

Central Board of Direct Taxes

Tax Policy & Legislation Division

Comments regarding removal or continuance of exemptions and deductions under the Income Tax Act, 1961.

Government is committed to simplify the tax laws, minimize the distortions within the tax structure and broaden the tax base. In this context, tax incentives in the form of various exemptions and deductions are being reviewed. Government is keen to involve all stakeholders in this exercise. Accordingly, existing exemptions and deductions under the Income Tax Act, 1961 are listed below and comments with supporting rationale for their removal or continuance may be sent by e-mail or post by 5 July 2006 to:

Ms. Anita Kapur, Joint Secretary, TPL-1, Room No:147-B/1, North Block, New Delhi.

e-mail: jstpl1@nic.in or

Ms. Monica Bhatia, Director, TPL-1, Room No:147-D, North Block, New Delhi.

e-mail: dirtpl1@nic.in or

Ms. Pragya S.Saxena, Director, TPL-II, Room No:147-E, North Block, New Delhi.

e-mail: dirtpl2@nic.in

List of existing exemptions and deductions under the Income Tax Act

Sl.No/Section/Nature of benefit/Eligible taxpayers

141. 80-DD Deductionsof Rs. 50,000/- where any expenditure has been incurred for the medical treatment of a dependant being person with disability. In case of severe disability, enhanced deduction of Rs. 75,000/- {Resident Individual/HUF}

142. 80-DDB Expenses actually incurred on medical treatment of specified diseases and ailments, up to Rs, 40,000/- In the case of senior citizens, enhanced deduction of Rs. 60,000/- is available {Resident Individual/HUF}

158. 80U Deduction of Rs. 50,000/- for an individual being a person with disability. In case of severe disability, enhanced deduction of Rs. 75,000/- is available. {Resident Individual}

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