Budget 2022: Tax benefits for caregivers of differently-abled children relaxed

Union Finance Minister Nirmala Sitharaman announced during the presentation of the Budget 2022-2023 speech that the conditions for availing tax benefits on the insurance policy for differently-abled children are going to be relaxed from now on. So far, expenses incurred on premium payments could be claimed as deductions, under section 80DD of the Income Tax Act, only if the payout is made to a differently-abled child after the death of a parent or caregiver.

Now, this has been relaxed to extend the deduction even if the sum is received while the parent/caregiver is still alive or when they attain 60 years of age. The new tax relief is going to be added under the same Section 80DD of the Income Tax act.

“Currently, the parent or guardian of a differently abled person can take an insurance scheme for such person. The present law provides for 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. 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,” Sitharaman said.

"Section 80DD of the Income Tax Act provides for a deduction for residents for the maintenance of disabled dependents. Relief for persons with disabled dependents is available as a deduction of such amounts invested in annuity providing schemes and is limited to Rs 75,000 or Rs 12,5000 per annum depending on the severity of the disability. However, currently, such deduction is available only if the annuity or the lump sum is receivable after the death of the subscriber. This has been relaxed to extend the deduction even if such sum is received during the lifetime of the subscriber on attaining the age of 60 years, provided the payment to the scheme has been discontinued,” Saraswathi Kasturirangan, Partner, Deloitte India, explained.

“The tax relief for persons with disability announced in Budget 2022 is an empathetic and thoughtful step on the government's part. 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. Moreover, this 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,” said Sarbvir Singh, CEO, Policybazaar.com.

"It is a positive step announced by the Honorable Finance Minister towards the differently-able citizens. The payment of annuity or lump sum amount to the differently-able dependent during the lifetime of the parent or guardians attaining the age of 60 years, will further give assurance to the policyholders that the purpose of their investment done in the insurance has been fulfilled without any worrying about the inconvenience or challenge in the claim settlement,” said Naval Goel, Founder and CEO, PolicyX.com.

“Moreover, this step taken infers the genuine significance of the protection, for example, to help the dependents monetarily after the demise of the policyholder. This step is likely to further gain the trust of the masses in insurance that will eventually lead to an increase in the penetration of insurance in the country,” Goel added.