Benefits of filing Income Tax Returns in India

Anil Kumar started working for an information technology major a year back. During the induction process, Kumar and his peers were told to save up and invest to save on tax outgo. With no liability behind him, Kumar was easily able to save Rs 87,000 over the last one year with some guidance from his father. His annual salary is Rs 3.50 lakh. 



As the basic exemption limit for financial year 2014-15 was Rs 2.50 lakh, Kumar's taxable income stood at Rs. 1 lakh. 

Kumar's father advised him to invest Rs 3,000 a month (Rs 36,000 a year) in Public Provident Fund and Rs 1,500 a month (Rs 18,000 a year) in equity mutual fund. Kumar was also made to buy a term plan of Rs 18 lakh for an annual premium of Rs 3,000. Towards the end of the last financial year, Kumar was made to open a fixed deposit account of Rs 30,000. Between April 2014 and March 2015, his Employee Provident Fund account had collected Rs 15,000. Thus, Kumar saved a total of Rs 102,000 in tax-saving instruments. 

After saving on his taxable pay, Kumar thought there was no need for him to file income tax returns (ITR) this July. But that is not true. Anyone earning a taxable salary, exceeding the basic exemption limit has to compulsorily file ITR even if the tax liability was reduced to zero post deductions. Only those who earn up to or less than the basic exemption limit of Rs 2.50 lakh need not file tax return. 

And there are advantages of doing so. An ITR receipt is an important document as it is more elaborate than Form 16. While Form 16 shows salary and the tax deductions by only one employer, ITR shows income from other sources also. 

Here are some advantages of filing ITR: 

Loans 

Having filed the ITR will help individuals, like the one in the example above, when they have to apply for a vehicle loan (two-wheeler or four-wheeler). All major banks can ask for a copy of tax returns. 

State Bank of India asks vehicle loan applicants for the latest salary-slip showing all deductions, TDS certificate / Form 16, copy of ITR for last two financial years. 

Additionally, showing a copy of ITR receipts also comes handy if your loan application is rejected or if you are not getting as much loan as you want. 

"Even while applying for a housing loan, many banks ask for Form 16 or even ITR receipts," says chartered accountant Arvind Rao. 

To claim refund 

If you have a refund due from the Income Tax Department, you will have to file returns, without which you will have to forgo the refund. 

Some taxpayers may be primarily investing through fixed deposit. On such investments tax is deducted at source (TDS) at 10 per cent. If the individual's total taxable income is less than the threshold of Rs 2.50 lakh, they can file returns and claim a full refund, says Vaibhav Sankla, director at tax consultancy firm, H&R Block. 

To carry forward losses 

If you do not file returns, you will not be able to carry forward capital losses (short-term or long-term), if any, in a financial year to be adjusted against capital gains made in the subsequent years. 

A long-term capital loss in one year can be carried forward for eight consecutive years immediately succeeding the year in which the loss is incurred. Long-term capital loss can be adjusted only against a long-term capital gain in the year. But short-term capital loss (STCL) can be adjusted against long- as well as short-term capital gains. 

Visa processing 

If  you are traveling overseas, foreign consulates ask you to furnish ITR receipt of the last couple of years at the time of the visa interview, says Rao. Some embassies may ask for ITR receipts of previous three years, while some others may ask for the most recent certificate. 
This is especially true if you plan to travel to the US, UK, Canada or Europe, not so stringent for South East Asia or Middle East. 

"Producing ITR receipts show that one has some source of income in India thus, strengthening your case as someone who will not leave the country for good but will return," explains Rao. 

When traveling to foreign countries, whether on a business or leisure trip, experts suggest you always carry income-related proofs along --- salary slip, Form 16 and ITR receipts. Consulates specify these requirements in most cases. 

Buying a high life cover 

Buying life cover of Rs 50 lakh or Rs 1 crore has become commonplace. However, these covers are available against your ITR documents to verify annual income. "Life insurance companies, especially LIC, ask for ITR receipts these days if you opt to buy a term policy with sum insured of Rs 50 lakh or more," says Sankla. 

The sum insured one can get with a term cover depends on many factors one of which is the income of the insured. If an insured does not have a very high salary, he doesn't need a higher insurance cover. 

Government tender 

Experts say that if one plans to start their business and need to fill a government tender or two for the same, they will need to show their tax return receipts of the previous five years. This again, is to show your financial status and whether you can support the payment obligation or not. 

However, this is no strict rule. It may vary depending on the internal rules of the government department. Even the number of ITRs required can vary. 

Self-employed 

Businessmen, consultants and partners of firms do not get Form 16. Hence, ITR receipts become an even more important document for them, provided their annual income exceeds the basic exemption limit of Rs 2.50 lakh. 

For all sorts of financial transactions, ITR receipts will be the only proof of income and tax payment for the self-employed.

For more information on tax filling and know how to save tax on your earning please visit by clicking on Chartered accountant in Delhi  and Tax consultant in India

source: http://economictimes.indiatimes.com/

How to save tax in India - Tax Consultant in India

File your tax returns before August 31

It’s time to pay more attention as the income tax department seeks more disclosures to catch tax evaders.

THIS is the time of the year when people run around for filing their income tax return. This year the deadline has been extended to 31st August. The controversial and cumbersome provisions for mandatory disclosure of expenditure on foreign trips and bank balances have been dropped.

New provisions have also been introduced, but in a much simpler form.

Although the new forms have done away with detailed disclosures, they still ask for information on your foreign trips and bank account but in an indirect way.

For example instead of foreign trips you took last year the new form simply asks for your passport number. Experts say the onus will now be on the income tax department to find out how much one spent on foreign trips using the passport number, which will not be a very difficult process for them. The intent is to catch tax evaders and curb the flow of black money in the country. Experts, however, dislike the idea of frequent changes being made in the tax laws.

"Every year there are some or other changes, which makes the common taxpayer confused. There are number of tax notices now being sent due to wrong selection of ITR form/ invalid returns." There are many more changes that have been brought out in ITR forms. Here is a guide to help you understand what these changes are: NEW FORM ( ITR 2A) Considering that a majority of taxpayers have more than one house property but do not have capital gains the finance ministry has proposed a new Form ITR 2A to simplify the process.

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The form is for an individual or HUF who have two house properties but does not have capital gains, income from business/ profession or foreign asset/ foreign income.

The good news is Form ITR 2 and the new form ITR 2A will not be more than 3 pages, and information will be captured in the schedules if applicable.

The positive aspect is you no more require giving details of foreign trips or expenditure thereon to the income tax department. But you still need to give your passport number, if available, in Forms ITR- 2 and ITR- 2A. For common tax payer there is nothing to be worried about but people who take more than 5 or 6 trips from unaccounted money need to be worried. It was earlier a loophole which was exploited by many people." Earlier you used to give details of only one bank account for refund purposes. From now onwards you will be required to give bank details of all your bank accounts which are held at any time during the previous year. You will need to fill the IFS code and account number of all the current/ savings. Experts say the move was needed as people used to hide income received in their other bank accounts.

If you have any confusion over filing your income tax return you can take the help of experts to avoid tax notices later.

POSTING OF ITR- V Earlier after filing the return online you needed to post acknowledgment separately to the income tax office. Now under the new provisions you do not need to post ITR V if the Aadhar number is provided in ITR form.

For more information on tax filling and know how to save tax on your earning please visit by clicking on Tax consultancy in Mumbai 

Direct Foreign Direct Investment (FDI) in India

After hearing enough rambling on FDI’s and its urgent need to stop Indian rupee fall, one is very curious to know about FDI and trying to understand what qualifies as FDI and what routes are available for them to invest in our country.

Foreign Direct Investment (FDI)

FDI as the name suggests, it is an investment directly made by a foreign company into business in another country. Such investment could be either in the form of business expansion in another country or could be a result of buyout of the company.

Direct Foreign investments in India were introduced by the then Finance Minister Dr. Manmohan Singh in 1991 under Foreign Exchange Management Act to promote such investments thereby increasing supply of domestic capital & increase the economic growth.

As per Foreign Exchange Management Act, ‘FDI’ means investment by non-resident entity/person resident outside India in the capital of an Indian company under Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000.

In India, foreign investments can be made through any of the following methods:

1.       Incorporate a wholly owned subsidiary (WOS) or a company

2.      Result of merger or an acquisition of an unrelated enterprise

3.      Acquire shares in an associated enterprise

4.      Participate in an equity joint venture with another investor or enterprise

    Who can invest in India?

1.       A Non-resident entity means a person resident outside India

2.      Non Resident Indian or Person of Indian Origin (PIO holder) or Overseas Citizen of India (OCI holder)

3.      A body corporate means a company incorporated outside India

4.      Foreign Institutional Investor (FII) means an entity established or incorporated outside India which proposes to make investment in India and which is registered as a FII in accordance with the Securities and Exchange Board of India (SEBI) (Foreign Institutional Investor) Regulations 1995.

5.      Foreign Venture Capital Investor (FVCI) means an investor incorporated and established outside India, which is registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI(FVCI) Regulations} and proposes to make investment in accordance with these Regulations

ENTRY ROUTES FOR INVESTMENTS

There are two important routes specified by Government of India through which an investor can apply for FDI. These are “Automatic route” and “Government approval route”.

“Automatic route” means Non Resident entities can invest in the capital of resident entities without the prior approval of Government i.e. Foreign Investment Promotion Board (FIPB), Department of Economic Affairs (DEA), Ministry of Finance or Department of Industrial Policy & Promotion, as the case may be.  Some of the major sectors in which Automatic route is permitted: Agriculture, mining, petroleum and natural gas, manufacturing, information services, trading, e-commerce activities. The investment percentage under Automatic route is permitted depending upon the nature of business.

“Government approval route” means that investment in the capital of resident entities by non-resident entities can be made only with the prior approval of Government i.e. Foreign Investment Promotion Board (FIPB), Department of Economic Affairs (DEA), Ministry of Finance or Department of Industrial Policy & Promotion, as the case may be. The sectors which are not covered under automatic route shall require approval of Government before any investment.

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Non-salaried ITR forms are out, All NRI Pay Attention

The Central Board of Direct Taxes (CBDT) has notified the revised income tax (I-T) return forms for non-salaried individuals for the assessment year 2015-16 (financial year 2014-15, which ended as of March 31, 2015). 

Forms ITR-3 to ITR 7 have been prescribed for tax payers such as sole proprietors (businessmen or professionals), limited liability partnerships, partnership firms, Hindu Undivided Families (HUFs) and companies (see table). 

Companies are required to file their tax return using Form ITR-6, which as compared to earlier years calls for a plethora of additional disclosures. Some of these disclosures such as corporate social responsibility (CSR) expenditure relate to new regulations applicable to India Inc for the first time during the FY 2014-15 others have been introduced to enable tax authorities to keep better track of overseas assets and income. The latter, could help tax authorities detect money laundering. 

India Inc has for the year ended March 31, 2015, incurred for the first time, expenditure towards corporate social responsibility. Such expenditure is not treated as a business expenditure under section 37(1) of the I-T Act and is not allowed as a deduction for tax purposes (In other words, it does not reduce the taxable income of the company). Thus if CSR expenditure has been debited to the profit and loss account of the company, it needs to be disclosed separately in Form ITR-6. Investment allowance was another new provision introduced in tax laws. 

If a company invests Rs. 25 crore or more in new plant and machinery during a year, a deduction of 15% of its value was allowed as an investment allowance. Details have to be provided of such investment allowance claimed. ITR-6 also calls for details of all domestic bank accounts, such as name of the bank, IFSC code, account number, and nature of the bank account. No details are required in respect of dormant bank accounts which have not been operational for the past three years. 

To keep better track of foreign income earned by India Inc and identify any possible instances of round tripping or money laundering, a detailed schedule FA has been introduced in ITR-6. 

India Inc has to fill in details of foreign assets including foreign bank accounts, interests in overseas trusts and immovable property held 'at any time during the financial year'. This also includes disclosure of foreign assets which are held as a beneficiary and not just direct ownership. The income from such foreign assets also requires to be disclosed. 

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Finance Ministry brings out new 3-page income tax forms and Last date of filing returns extended to August 31 

The Finance Ministry today came out with new three-page income tax return (ITR) forms, dropping the controversial provision for mandatory disclosure of foreign trips and dormant bank accounts, while it also extended the last date of filing to August 31.

The new forms - ITR 2 and ITR 2A - will have only three pages and other details will have to be filled in schedules, said a Finance Ministry statement.

A new form ITR 2A has been brought out by the ministry which can be filed by an individual or HUF who does not have capital gains, income from business/ profession or foreign asset/foreign income

The statement also said that the last date for submission of tax returns will be extended to August 31, 2015.

With regard to the controversial provision of disclosing details of foreign visits, the release said that the assessee will be required to disclose only the Passport Number.

"In lieu of foreign travel details, it is now proposed that only Passport Number, if available, would be required to be given in Forms ITR-2 and ITR-2A. Details of foreign trips or expenditure thereon are not required to be furnished," it said.

Further, the Ministry has done away with disclosure of details of dormant accounts which are not operational during the last three years.

"As regards bank account details in all these forms, only the IFS code, account number of all the current/savings account which are held at any time during the previous year will be required to be filled-up. The balance in accounts will not be required to be furnished," the statement added.

The simplified I-T return forms are being brought after the earlier version was opposed by industry, MPs and assessees for its cumbersome disclosure norms.

The salaried individuals and those persons who do not have business/professional income are required to file I-T returns in either ITR-1 or ITR-2 by July 31 every year.

Further, an individual, who is not an Indian citizen and is in India on a business, employment or student visa (expatriate), would not mandatorily be required to report the foreign assets acquired by him during the previous years in which he was non-resident and if no income is derived from such assets during the relevant previous year, the statement said.

At present individuals/HUFs having income from more than one house property and capital gains are required to file Form ITR-2.

Observing that majority of individuals/HUFs who file Form ITR-2 do not have capital gains, the statement said, "with a view to provide for a simplified form for these individuals/HUFs, a new Form ITR 2A is proposed which can be filed by an individual or HUF who does not have capital gains, income from business/profession or foreign asset/foreign income."

Individuals having exempt income without any ceiling (other than agricultural income exceeding Rs 5,000) can now file Form ITR 1 (Sahaj). Similar simplification is also proposed for individuals/HUF in respect of Form ITR 4S (Sugam), it added.

It further said that as software for filing these forms was under preparation, the last date for submission of tax returns will be extended to August 31, 2015.

"As the software for these forms is under preparation, they are likely to be available for e-filing by third week of June. Accordingly, the time limit for filing these returns is also proposed to be extended up to August 31, 2015. A separate notification will be issued in this regard," the release said.

Following the controversy over the ITR forms for Assessment Year 2015-16, which sought details of bank accounts and foreign visits, the revenue department had put them on hold.

The ITR forms, which was notified last month by the CBDT for the current assessment year, had specific columns for banks accounts, IFSC Code, names of joint account holders and foreign visits, including the ones paid by companies. 

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New Rules for filing Tax Returns in India

New forms, additional information, completely paperless filing.... the Finance Ministry has introduced several changes in the way taxpayers will file their returns this year. As a taxpayer you need to be aware of these changes lest you file an incorrect return that gets rejected or results in a scrutiny notice.

This week's cover story looks at the changes in the tax filling process and documentation and explains what taxpayers need to do. There is also a smart step-by-step guide to tax filing that will ensure an error-free return.

Many taxpayers tend to believe that if they have no tax liability or have already paid all taxes, they need not file their returns. "It does not really matter whether you have paid any taxes or not.

Even if all your taxes are paid through TDS by the employer and bank or you have paid an advance tax, you still need to file returns if your annual income exceeds Rs 2.5 lakh, .But before we get there, let's look at the major changes in this year's tax filing rules

Extended deadline

The filing deadline has been extended to 31 August so you have about six weeks to file your return. But it's best not to delay the process unnecessarily. If you have got all your documents (Form 16 from employer, bank statement, TDS details, capital gains statement) in place, file your return as soon as possible and get over with it. Why delay something that you cannot avoid.

New tax forms

The massive outcry against the mandatory disclosures of foreign trips and dormant bank accounts in the new ITR forms has forced the government to revise them. The revised forms are much simpler and taxpayerfriendly. But though you won't have to fill a 14-page return, the new forms have retained some of changes proposed earlier.

A new three-page ITR 2A form has been introduced for individuals and HUFs who may own more than one property, but do not have any taxable capital gains, income from business or profession or foreign asset and income outside India.

ITR-1 (Saral) can now be filed by individuals even if they have exempt income. Earlier, individuals were not allowed to use this form if they had exempt income exceeding Rs 5,000. However, individuals having agricultural income exceeding Rs 5,000 will still not be able to use Form ITR-1.

E-filing scope widened

One major change is that e-filing is now mandatory for taxpayers who are claiming a refund. Even if their income is below Rs 5 lakh, they still need to take the online route. However, this rule does not apply to super senior citizens above 80 years. They can still file their taxreturns in the physical mode.

However, e-filing has its own benefits. "E-filed tax returns get processed much faster and the refunds gets credited early and go directly into your bank account. The taxpayer can also track the status of processing of his tax return online".

If you are familiar with tax forms and rules, you can file for free on the Income Tax Department website. Some portals also allow free tax filing. Others charge a small fee for guiding you. Take professional help if not sure. It costs a little, but will ensure that your tax return is error-free.

For more information on tax filling and know how to save tax on your earning please visit by clicking on Tax consultancy in Mumbai 

Income Tax Deduction in India

Every individual who earns an income in India is supposed to pay Tax on the Income earned by him during that financial year to the government of India. Calculation of the Income Tax to be paid by an individual is a cumbersome process. The government of India provides certain benefits to its citizens who earn an income in the country by means of deductions, exemptions etc. Before going into the details below are the items that would be covered in this article. 


1. Heads of Income 
a. What exactly qualifies to be an income, for which you need to pay Tax. 
b. Salary Perquisites that are taxable
2. Deductions
a. House Rent Allowance – HRA
b. Leave Travel Allowance – LTA
c. Medical Allowance
d. Transportation Allowance
e. Interest paid on Housing Loan
3. Exemptions
a.Under Section 80C 
b. Under Section 80D 
c. Under Section 80DD
d.Under Section 80DDB
e.Under Section 80E
f.Under Section 80U

4.Clubbing of Minor Income

Heads of Income: 
The Heads of Income includes the types of income earned by an individual that would qualify as Income for which he/she needs to pay tax. These include the components that would be earned by an individual through employment with an organization/company. They are: 
1. Salaries & Wages 
2. Bonus & Commissions 
3. Other Perquisite benefits 

According to the IT laws Perquisites include the following: 
a. Rent free accommodation or concessional rate accommodation received from the employer
b. Any other benefit given by the employer either in cash or material (Apart from monthly Salary) 
c. Any Fringe benefits provided by the employer (This would include Mobile bill reimbursement, Petrol expenses etc) 

Deductions on Income: 

As per the IT regulations, there are certain deductions that are allowed on the income earned by an individual. These amounts can be subtracted while arriving upon the net taxable salary of an individual. 

They include: 
1. Housing Rent Allowance (HRA) 
The HRA is usually a part of the salary/wages paid out to an employee by the employer. The deduction on HRA is eligible to any individual who is residing in a rented house and is paying rent to the house owner. There are some rules that govern the limit till which HRA can be deducted from your taxable income. Out of the below mentioned 3 items whichever is LEAST will be considered for the purpose of deduction under the HRA component. 
a. Actual amount of the HRA paid by the employer (As part of Salary) Or
b. 50% of Basic salary in case of Metros (Delhi, Bombay, Calcutta & Chennai) or 40% of Basic salary in case of non Metros. Or
c. Actual rent paid by the individual – 10% of Basic salary 
For e.g., your monthly Basic salary is Rs. 12,000/- and the HRA component as per your salary is Rs. 6000/- and the actual rent you are paying is Rs. 6000/- in Chennai then the amount you would be eligible for HRA exemption is Rs. 4800/- (Actual rent – 10% of Basic salary) per month. 

2. Leave Travel Allowance (LTA) 
LTA also is usually a part of the salary paid out to an employee as part of his employment. As per the Indian tax laws you are eligible to claim an amount that less than or equal to the total LTA paid out to him by his employer. This would cover the expenses incurred in travel of self with/without dependents. (Dependents would include spouse, children and dependent parents) There are some conditions which need to be satisfied for an individual to claimexemption under LTA. They are: 
a. LTA can be claimed only twice in a block of 4 financial years. You cannot claim LTA every year. 
b. Only Transportation expenses would be considered for LTA. Accommodation & food expenses are not considered. 
c. For an employee to be eligible for claiming LTA, he/she should have taken at least 3 days of earned leave from the employer 

3. Medical Allowance 
Medical allowance is also a part of the salary paid out to an employee. The maximum amount eligible for this component is either Rs. 15,000/- or the actual amount paid out to you as part of Salary. To claim exemption under this you need to provide medical bills to substantiate your claim of having incurred medical expenditure. The medical bills can be in the name of the individual or his spouse or children or dependent parents. 

4. Transportation Allowance 
The IT laws permit a deduction of Rs. 9,800/- as a standard transportation allowance to all resident individuals who pay income Tax. This amount is standard irrespective of the job/industry the individual is employed. Also this amount does not change irrespective of the means of transport you use to commute to your office. 

5. Interest Paid on housing loan 
The IT laws permit an individual who has taken a home loan from a recognized bank for the purpose of construction or purchase of a residential property to claim exemption on tax on the interest part of the loan taken by the individual. There is a limit to this exemption which is as follows. 
a. If the property is occupied by the individual then the maximum eligible amount under this is Rs. 1,00,000/- 
b. If the property is rented out and the rental income is included in the total income earned by the individual then there is no maximum amount. The actual interest paid on the home loan can be used for deduction from total salary considered for the purpose of income tax. 
Note: Exemption is available on home loans taken to purchase residential property only. Home loans taken to purchase land do not qualify for income tax exemption. 


Income Tax Exemption: 

The Income Tax laws allow all individuals who are assessed for income tax to claim exemption from income tax under the following heads. 
1. Section 80C 

The section 80C of the IT laws provide exemption from income tax on amounts that are invested by the individual. This usually includes the amount theindividual invests in certified instruments that are exempt from tax. They are: 
a. PF – Provident Fund (A portion of your salary is deducted by your employer as PF and would be remitted to the PF house that is maintained by thegovernment of India. A maximum of 12% of your basic Salary is eligible for exemption from income tax) 
b. PPF – Public Provident Fund – A maximum of Rs. 70,000/- per financial year. 
c. ELSS – Equity Linked Savings Scheme (Mutual funds) 
d. NSC – National Savings Certificate
e. KVP – KisanVikasPatra
f. Life Insurance (Insurance provided by LIC & Other registered Insurance companies) 
g. Tax Saving ULIP’s – Unit Linked Insurance Plans
h. Principal amount repaid as part of the Home loan
i. 5 year bank fixed deposits
A point to be noted here is that the sum total of all these components can be a maximum of Rs. 1,00,000/- per financial year. 

2. Section 80D 

This section of the IT laws provide exemption on the premium paid towards Medical insurance of the individual, spouse & children and also dependent parents. The maximum eligible amount under this section is Rs. 15,000/- per financial year. 

3. Section 80DD 

Exemption under sec 80DD is available to any individual who: 
a. Incurs any expenditure for the medical treatment, training and rehabilitation of a disabled dependent Or 
b. Deposits any amount in schemes of the LIC of India for the maintenance of the disabled dependent. 
A deduction of Rs. 50,000/- is available to all individuals who incur any of the above two said expenditures. Where the dependent has a Severe disability a deduction of Rs. 1,00,000/- is allowed. An individual should furnish a copy of the issued certificate by the medical board constituted either by the Centralgovernment or a state government in the prescribed form, along with the return of income of the year for which the deduction is claimed.

4. Section 80DDB 
An individual, resident in India spending any amount for the medical treatment of specified diseases affecting him or his spouse, children, parents, brothers and sisters and who are dependent on him, will be eligible for a deduction of the amount actually spent or Rs 40,000, whichever is less. 

For any amount spent on the treatment of a dependent senior citizen an individual is eligible for a deduction of the amount spent or Rs 60,000, whichever is less is available. The individual should furnish a certificate in Form 10-I with the return of income issued by a specialist working in a government hospital. 


5. Section 80E 
Under this section, deduction is available for payment of interest on a loan taken for higher education from any financial institution or an approved charitable institution. The loan should be taken for either pursuing a full-time graduate or post-graduate course in engineering, medicine or management, or a post-graduate course in applied science or pure science. There is no upper limit and the entire interest amount repaid each year to the bank for a period of 8 years is exempt from income tax

6. Section 80U - It is deduction in the case of a person with a disability. An individual who is suffering from a permanent disability or mental retardation as specified in the persons with disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999, shall be allowed a deduction of Rs 50,000. In case of severe disability it is Rs. 75,000. 

The Income tax assessee should furnish a certificate from a medical board constituted by either the Central or the State Government, along with the return of income for the year for which the deduction is claimed. 
Note: Section 80U is available only for individuals who are disabled but still earn an income that qualifies for income tax. 

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