Condition of releasing of annuity to a disabled person
The existing provision of section 80DD, inter alia, provide for a deduction to an individual or HUF, who is a resident in India, in respect of (a) expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or (b) amount paid to LIC or any other insurer or administrator or specified company in respect of a scheme for the maintenance of a disabled dependant.
2. Sub-section (2) of the aforesaid section provides that the deduction shall be allowed only if the payment of annuity or lump sum amount is made to the benefit of the dependant, in the event of the death of the individual or the member of the HUF in whose name subscription to the scheme has been made.
3. Sub-section (3) of the aforesaid section provides that if the dependant with disability, predeceases the individual or the member of the HUF, the amount deposited in such scheme shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year.
4. In the Writ Petition No. 1107 of 2017 Ravi Agrawal versus Union of India and Another, Justice A.K. Sikri observed that that there could be harsh cases where handicapped dependants may need payment of annuity or lump sum basis even during lifetime of their parents/guardians. It was further observed that the Centre may take into consideration all the aspects, including those where a disabled dependant might need payment on annuity or lump sum basis even during the lifetime of the parents or guardians.
5. Therefore, in order to remove this genuine hardship, it is proposed to allow the deduction under the said section also during the lifetime, i.e., upon attaining age of sixty years or more of the individual or the member of the HUF in whose name subscription to the scheme has been made and where payment or deposit has been discontinued. Further, it is proposed that the provisions of sub-section (3) shall not apply to the amount received by the dependant, before his death, by way of annuity or lump sum by application of the condition referred to in the proposed amendment.
6. This amendment will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.
*****
Note on Clause 21 of Finance Bill 2022
Clause 21 seeks to amend section 80DD of the Income-tax Act relating to deduction in respect of maintenance including medical treatment of a dependant who is a person with disability.
The provisions of the said section, inter alia, provide for a deduction to an individual or Hindu undivided family, who is a resident in India, in respect of expenditure incurred for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or amount paid to Life Insurance Company or any other insurer or administrator or specified company, in respect of a scheme for the maintenance of a disabled dependant.
Sub-section (2) of the said section provides that deduction shall be allowed only if the payment of annuity or lump sum amount has been made for the benefit of the dependant, being a person with disability, in the event of the death of the individual or the member of the Hindu undivided family in whose name subscription to the scheme has been made and the assessee nominates either the dependant or any other person to receive the payment on his behalf for the benefit of the dependant, being a person with disability.
Sub-section (3) of the said section provides that if the dependant with disability, predeceases the individual or the member of the Hindu undivided family, the amount deposited in such scheme shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year.
It is proposed to substitute clause (a) of sub-section (2) of the said section so as to provide that the deduction under clause (b) of sub-section (1) of the said section shall be allowed if the scheme provides for payment of annuity or lump sum amount for the benefit of a dependant, being a person with disability, in the event of the death of the individual or the member of the Hindu undivided family in whose name subscription to the scheme has been made; or on his attaining the age of sixty years or more or the member of the Hindu undivided family, and the payment or deposit to such scheme has been discontinued.
Further, it is proposed to insert a new sub-section (3A) to provide that the provisions of sub-section (3) shall not apply to the amount received by the dependant, being a person with disability, before his death, by way of annuity or lump sum by application of the condition referred to in the proposed sub-clause (ii) of clause (a) of sub-section (2).
These amendments will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
*****
Extract of Clause 21 of Finance Bill 2022
21. Amendment of section 80DD.
In section 80DD of the Income-tax Act, with effect from the 1st day of April 2023,––
(I) in sub-section (2), for clause (a), the following clause shall be substituted, namely:––
“(a) the scheme referred to in clause (b) of sub-section (1) provides for payment of annuity or lump sum amount for the benefit of a dependant, being a person with disability,––
(i) in the event of the death of the individual or the member of the Hindu undivided family in whose name subscription to the scheme has been made; or
(ii) on attaining the age of sixty years or more by such individual or the member of the Hindu undivided family, and the payment or deposit to such scheme has been discontinued;”;
(II) after sub-section (3), the following sub-section shall be inserted, namely:––
“(3A) The provisions of sub-section (3) shall not apply to the amount received by the dependant, being a person with disability, before his death, by way of annuity or lump sum by application of the condition referred to in sub-clause (ii) of clause (a) of sub-section (2).”.
******
RECOMMENDED BUDGET 2022 POSTS
