Tax Deductions for Persons with Disabilities : Clause 154 of the Income Tax Bill, 2025 vs. Section 80U of the Income Tax Act, 1961

Clause 154 Deduction in case of a person with disability.

Income Tax Bill, 2025

Introduction

Clause 154 of the Income Tax Bill, 2025 introduces significant provisions regarding the deduction available to individuals with disabilities. This clause, situated under the heading "Other deductions," seeks to provide tax relief to resident individuals who are certified as persons with disability or persons with severe disability by a medical authority. The clause is a successor to the existing Section 80U of the Income Tax Act, 1961, and is to be read in conjunction with the procedural and definitional framework provided by Rule 11A of the Income-tax Rules, 1962.

The legal significance of this provision is multi-layered. It not only reflects the evolving approach of Indian tax law towards the inclusion and welfare of persons with disabilities, but also demonstrates the ongoing process of legislative modernization and harmonization with contemporary social legislation, such as the Rights of Persons with Disabilities Act, 2016. The comparative study of Clause 154, Section 80U, and Rule 11A is essential to understand the continuity, changes, and practical implications for taxpayers, tax authorities, and medical professionals involved in the certification process.

Objective and Purpose

The primary objective of Clause 154 is to grant a fixed deduction from total income to resident individuals suffering from a disability, as certified by a competent medical authority. The legislative intent is rooted in the recognition of additional financial burdens faced by individuals with disabilities, such as medical expenses, assistive devices, and reduced earning capacity. By offering a standardized deduction, the law aims to provide equitable tax treatment and social support to this vulnerable category of taxpayers.

Historically, Section 80U was introduced in the Income Tax Act, 1961, to address similar concerns, with subsequent amendments expanding its scope and quantum of deduction in line with inflation and evolving definitions of disability. Rule 11A operationalizes these statutory provisions by prescribing the forms, authorities, and procedural aspects for certification. Clause 154, as proposed in the 2025 Bill, carries forward this legacy with certain structural and procedural refinements, potentially to align with modern legislative drafting and streamlined compliance.

Detailed Analysis of Clause 154 of the Income Tax Bill, 2025

1. Eligibility and Quantum of Deduction

Clause 154(1) provides that an individual, being a 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 Rs. 75,000 or Rs. 1,25,000, respectively, while computing total income.

• Residency Requirement: The deduction is available only to individuals who are residents in India during the tax year. This is consistent with the existing Section 80U, which also restricts the benefit to resident individuals.
• Certification: The individual must be certified by a "medical authority" as a person with disability or severe disability. The certification must be obtained at any time during the tax year, offering flexibility in timing.
• Quantum: The deduction is fixed at Rs. 75,000 for persons with disability and Rs. 1,25,000 for persons with severe disability, mirroring the quantum specified in the current Section 80U (after the Finance Act, 2015 amendments).

2. Procedural Conditions for Allowance of Deduction

Clause 154(2) stipulates three cumulative conditions for the deduction to be allowed:

• (a) Furnishing of Certificate: The individual must furnish a copy of the certificate issued by the medical authority. This is a compliance requirement to ensure authenticity and prevent abuse of the provision.
• (b) Reassessment of Disability: If the certificate specifies a period after which the extent of disability must be reassessed, the deduction is not allowed for any tax year succeeding the year in which the certificate expires, unless a new certificate is obtained and submitted. This ensures that only those with continuing disabilities receive the benefit.
• (c) Form and Manner of Submission: The certificate must be furnished in the prescribed form and manner along with the return of income u/s 263 for the tax year in which the deduction is claimed. This introduces a procedural alignment with the return filing process.

3. Definitions and Referential Provisions

Clause 154(3) provides that the terms "disability," "medical authority," "person with disability," and "person with severe disability" shall have the same meanings as provided in section 127 of the Bill. This cross-referential drafting is designed for internal consistency and to avoid definitional ambiguities.

Comparative Analysis with Section 80U of the Income Tax Act, 1961

1. Structural and Substantive Parity

A close reading reveals that Clause 154 is substantially modeled on Section 80U of the Income Tax Act, 1961. Both provisions:

• Apply to resident individuals.
• Require certification by a medical authority.
• Provide a fixed deduction amount (Rs. 75,000/Rs. 1,25,000).
• Mandate submission of the certificate in the prescribed form and manner along with the return of income.
• Stipulate that the deduction is not available beyond the validity of the certificate unless renewed.

2. Differences in Language and Drafting

While the substance is largely unchanged, certain differences in language and structure are notable:

• Reference to Definitions: Section 80U refers to definitions in the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995, and the National Trust Act, 1999. Clause 154, by contrast, refers internally to section 127 of the Bill, which presumably consolidates or updates these definitions. This suggests a move towards legislative self-containment and possibly updated definitions in line with the Rights of Persons with Disabilities Act, 2016.
• Return Filing Section: Section 80U requires submission of the certificate along with the return u/s 139 of the 1961 Act; Clause 154 refers to section 263 of the new Bill, indicating a renumbering or restructuring of return filing provisions.
• Clarity and Modernization: The language in Clause 154 is more streamlined and less encumbered by multiple explanations and cross-references to external legislation, which may enhance clarity and ease of compliance.

3. Legislative Evolution and Policy Considerations

Section 80U has been amended several times since its introduction, with the quantum of deduction and the scope of disabilities expanded over time. The current approach, as reflected in Clause 154, appears to maintain the same policy direction-providing standardized relief to individuals with disabilities, with an emphasis on procedural compliance and periodic reassessment where necessary.

Rule 11A of the Income-tax Rules, 1962: Procedural and Substantive Analysis

1. Medical Authority for Certification

Rule 11A prescribes the composition of the medical authority competent to certify disabilities for the purposes of Section 80U (and Section 80DD). It specifies:

• For autism, cerebral palsy, and multiple disabilities: Certification may be done by a neurologist (MD in Neurology), a pediatric neurologist (for children), or a Civil Surgeon/Chief Medical Officer in a government hospital.
• For other disabilities: Certification must follow forms and procedures notified under relevant government notifications, ensuring that the medical authority is competent and the process is standardized.

2. Form and Mode of Certificate Submission

Rule 11A(2) mandates submission of the certificate along with the return of income, in prescribed formats:

• Form No. 10-IA: For autism, cerebral palsy, and multiple disabilities.
• Other prescribed forms: As notified by the government for other disabilities.

This ensures uniformity and verifiability in the certification process, reducing the scope for fraudulent claims.

3. Validity and Reassessment

Rule 11A(3) clarifies that where the disability is temporary and requires reassessment, the certificate is valid only for the period specified, and the deduction is allowed only during that period. This aligns with the statutory requirement that deductions are not allowed beyond the expiry of the certificate unless renewed.

Practical Implications

1. For Taxpayers

• Accessibility: The deduction is accessible to all resident individuals who can obtain the requisite certification, regardless of their income level or the actual expenses incurred on account of disability.
• Documentation: Taxpayers must ensure timely procurement and submission of the correct form of medical certificate, and track the validity period for reassessment where applicable.
• Quantum Certainty: The deduction is fixed, providing predictability in tax planning.

2. For Medical Authorities

• Certification Role: Medical professionals designated as authorities u/r 11A play a critical gatekeeping role in ensuring only eligible individuals receive the benefit.
• Standardization: Prescribed forms and government notifications standardize the evaluation and certification process, ensuring uniformity across jurisdictions.

3. For Tax Administration

• Verification: The requirement to submit certificates in prescribed forms along with the return facilitates verification and reduces the risk of false claims.
• Procedural Efficiency: Alignment of certificate submission with the return filing process (under the new section 263) may streamline administration.

4. For Policy Implementation

• Inclusivity: The provision reflects a broader policy commitment to social inclusion and the economic empowerment of persons with disabilities.
• Potential Gaps: The fixed deduction does not account for the actual diversity of expenses or needs among persons with different disabilities, which may warrant future policy attention.

Conclusion

Clause 154 of the Income Tax Bill, 2025 preserves and modernizes the core features of Section 80U of the Income Tax Act, 1961, offering standardized tax relief to resident individuals with disabilities. The provision is supported by the procedural framework of Rule 11A, which prescribes the authorities and forms for medical certification. The legislative approach is characterized by clarity, standardization, and administrative efficiency, but certain challenges remain in terms of adequacy of the deduction, alignment of definitions, and practical accessibility.

Future legislative or administrative reforms may consider periodic revision of the deduction amount, further harmonization with contemporary disability rights legislation, and enhanced outreach to ensure that the intended beneficiaries can access the relief with minimal procedural friction.

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Full Text:

Clause 154 Deduction in case of a person with disability.

 

Dated: 21-4-2025