Financially able

This International Day of Persons with Disabilities, here’s a review of the financial products specially tailored for them

Financial planning is important for all of us, but it is much more critical for the 2.7 crore differently-abled people in India. The knowledge that their money is channelled into products that can give them a steady stream of income in the future and take care of medical costs can help them lead a better life. The long-pending Disability Bill, once passed, will also make a difference.

While there is a long way to go towards making available a complete array of financial products for the differently abled, a few companies do offer such products. So it’s a good idea to get to know the options available.

Then the needs of your family must be identified. For instance, retirement planning for a family that includes a child with special needs could require allocating resources to cover their lifetime and that of the child.

The expenses may also be higher if one were to consider residential living options and costs. Also, having some form of health cover is essential. Insurance service providers say that they evaluate the coverage and premiums on a case-by-case basis.

So, rather than relying on employer-provided group cover or go with online purchase, it is advisable to go through a health check and then buy the right policy. It may also be beneficial to understand the legal aspects when bringing up a special needs child. For instance, one may need to take up a guardianship certificate.

There may also be procedures that need to be followed when you appoint a disabled person as a nominee for a financial asset or leave an inheritance. One may also have to create a trust to administer finances. Many families find this difficult to implement. This International Day of Persons with Disabilities, here’s a closer look at the financial products available to this segment.

Click here for Insurance cover for disabled: Low financial inclusion

Insurance options

Of the life insurance products available currently, there are hardly any that are designed specifically to cater to the needs of differently-abled individuals.

With the existing schemes, more often than not, these people fail to qualify for regular term life cover, despite being gainfully employed and leading an active life.

This is due to lack of data on life expectancy on disabled and the insurers perceiving them to be a high-risk category. Still, they may manage to qualify for endowment, ULIP and higher premium products, on a case-to-case basis.

In some cases, government-owned insurance companies seem to cover disabilities which many of their private sector peers do not. For instance, LIC provides accident cover to individuals with congenital visual impairment.

When it comes to health insurance, private insurers again do not have any specific schemes for those with special needs. Generic schemes and employer’s group insurance schemes — which could have many exclusion clauses — are what one has to contend with. The Indian government offers a health insurance policy, called Niramaya, to persons with autism, cerebral palsy, mental retardation and multiple disabilities.

The insurance cover (₹1 lakh) can be used for a wide range of services, such as regular medical check-up, hospitalisation, therapy and corrective surgery. These categories have sub-limits that cannot be exceeded. There is no need for medical tests and the policy also covers out-patient services done at non-empanelled hospitals.

To enrol, you need a disability certificate issued by an authorised authority and address proof. The annual payment is ₹500, if the family income is over ₹15,000 per month. The insured has to pay the medical expenses and apply for reimbursement along with documents, such as medical bills, hospitalisation report and discharge card. The government also plans to launch a new health insurance scheme called Swavlamban for people with blindness, low vision, with hearing impairment, those who are leprosy-cured, with loco-motor disability and mental illness.

The plan will offer coverage of up to ₹2 lakh as a family floater and will have a single premium (of ₹3,100 per year) across age band. The insured will likely be required to pay 10 per cent of the premium. The policy can be taken by 18-65 year-olds whose family income is less than ₹3 lakh a year.

The Centre offers a life insurance scheme for care-givers of persons with autism, cerebral palsy, mental retardation and multiple disabilities. The Asmita term policy can be taken by parent, legal guardian or supporter under 59 yeas of age.

Premiums vary based on the age of the insured — from ₹150 for an 18-year old to ₹1,500 for a 59-year old, for ₹1 lakh sum assured. The premium can be paid by any supporter, who may be a non-profit agency.



Loan products

Unlike insurance, availing a loan — be it for education, personal or business — is one area where the differently-abled have a reasonable range of choices. Generic personal loan options, such as for housing and vehicles, can be obtained on normal terms.

Also, Punjab National Bank offers discounted rate of interest (4 per cent) for its education loans. Bank of India provides loans of up to ₹1 lakh to purchase rehabilitation aids and appliances under its Star Mitra secured personal loan scheme.

But the main loan funding agency is the National Handicapped Finance and Development Corporation (NHFDC) set up under the Ministry of Social Justice and Empowerment. It extends loans through its 42 channel agencies and banks such as Punjab and Sind Bank.

Smaller loan amounts (less than ₹5 lakh) are sanctioned directly by the state channel agents, who are responsible for implementing these schemes. Higher amounts are routed to NHFDC.

You can avail loans for a wide range of needs, including personal and business. For instance, one can purchase mobility devices such as motorised wheelchairs or motor cars with these funds.

How much you can borrow varies across loan categories. You can get up to ₹3 lakh to set up a small trading business; this goes up to ₹5 lakh in the case of services business and ₹10 lakh for agriculture and purchasing equipment for commercial hiring. Micro credit of ₹50,000 per beneficiary is also available through non-profit organisations.

For these loans, the business will have to be operated by the handicapped applicant and at least 15 per cent of the firm’s employees will have to be disabled.

However, NHFDC also provides loans of up to ₹5 lakh to parents’ association of mentally-retarded persons to set up business. These should directly involve the beneficiary. In addition to business loans, up to ₹2 lakh is provided to disabled individuals to pursue vocational training.

 To be eligible, you need a certificate issued by the authorities showing 40 per cent or more disability.

Age eligibility is 18 years normally; but this is relaxed to 14 years in case of those with mental retardation and the funding is provided to the parents or legal guardians. Other documents that you need to submit along with the application form include age, income and caste certificate. Existing borrowers can avail repeat loans if they have a good payment track record.

The interest rate ranges between 5 and 8 per cent based on the loan amount. For instance, the interest rate is 5 per cent for loans up to ₹50,000, 7 per cent for loans of ₹5 lakh to ₹15 lakh.

For individuals suffering from visual impairment or mental retardation, a concession of 0.5 per cent is offered. Women borrowers are given an additional 1 per cent reduction on the rates.

Tax benefits

There are income and professional tax benefits you can avail as a person with disability. These require having a certificate from authorities giving the level of disability.

Section 80U allows deduction from taxable income of ₹50,000 for a person who is at least 40 per cent disabled. The limit is ₹1,00,000 for those with severe disability (80 per cent or more). The limits have been increased to ₹75,000 and ₹1,25,000, respectively, for disabled and severely disabled persons from assessment year 2016-17.

You can avail benefits for expenses incurred for a disabled dependant under Section 80DD. Medical treatment, including nursing, training and rehabilitation expenses and payments to insurance companies for a dependant can also be claimed.

The deduction limits are similar to the 80U benefit and from assessment year 2016-17, the limits have been increased. However, you cannot avail Section 80DD benefit if the dependant has claimed Section 80U benefit.

You can claim deductions under Section 80DDB for money spent towards medical treatment for neurological and other ailments. Any individual or HUF can claim this for expenses on themselves or dependants.

The deduction amount is capped at ₹40,000 for medical expenses with an additional deduction of ₹20,000 for senior citizens; starting from assessment year 2016-17, very senior citizens (those over 80 years of age) can avail deduction of ₹80,000.

You will be required to obtain a prescription from a specialist doctor for the purpose of availing the deduction.

If you are a salaried person, you can also claim additional transport allowance under Section 10(14) Rule 2BB. Normally, transport allowance of ₹800 per month is exempted from tax. In case of employees who are blind or have a disability in the lower extremities, the exempted amount is ₹1,600 per month.

You can request the employer to structure the pay to have a higher monthly transport allowance. This tax benefit is regardless of the actual expenses and no bills are required to be submitted. From assessment year 2016-17, the transport allowance limits will be doubled.

Besides these deductions, the rules on clubbing of income are different in case of a minor child who is disabled. Normally, the income of a minor child is clubbed with that of the parent for the purpose of income tax. But Section 64 allows a disabled child to be treated as a separate entity who can file an independent return. The child can also claim benefits under Section 80U while filing the return.

In addition to income tax benefits, States such as Maharashtra provide exemptions in professional tax payments.

Under Section 27A, those with a permanent physical disability need not pay professional tax. In most States, professional tax is exempted for persons with disability but the rule varies and you should check the exemption in your State of residence.

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