All Indian residents are eligible to claim tax deductions under Section 80DD of the Income Tax Act, 1961. In order to claim the deduction an individual must have to submit medical certificates, medicine bills, and all other supportive documents.
Table of Contents
- Eligibility of Claim Deduction under Section 80DD
- Expenses that are Deducted for Income Tax Calculation
- Who is Defined as Disabled Dependant According to Income Tax laws?
- What kind of Disability or Severe Disability is considered under the Section 80DD?
- Where can you avail a Medical Certificate for the Disabled Dependant?
Medical treatment, in the past few years has been on the rise, which has made medical treatment a difficult service to avail for the lower and middle startas of the Indian society. The Indian Government with the intention to allow some sort of relief to these groups of people especially people dependent with disability or on severe disability may now be provided some help through the Income tax under Section 80DD of the Income Tax Act, 1961. Before one goes into further details, it is important to understand that the income tax has changes in rates and minor amendments but the legal or relief aspect had to be based on the the 1961, as of now.
The new tax structure announced in the Union Budget 2020-2021 will have an impact on the deductions which were availed under Section 80DD.
Section 80DD of the Income Tax Act allows for certain deductions related to the medical expenditure for the treatment of differently abled individuals.
Under the new tax structure, tax benefits for disability under Section 80DD will no longer be claimable.
Eligibility of Claim Deduction under Section 80DD
To be eligible for the claim deduction under the section 80DD, one must:
- Be an Individual or be a part of a Hindu undivided family, who is a resident in India.
- This deduction is not available to non-resident Indian (NRI), since a lot of countries such as Canada, largely help their residents when it comes to medical treatment.
Expenses that are Deducted for Income Tax Calculation
The following are the expenses that are exempted for income tax under section 80DD:
- Any expenses incurred for medical treatment which includes nursing, training as well as rehabilitation of dependent that is disabled.
- The amount paid towards Life Insurance Corporation (LIC), Unit Trust of India or any of the other insurers for the sole purpose of buying specified schemes or insurance policies to help in the maintenance of a dependant with disabilities.
Who is Defined as Disabled Dependant According to Income Tax laws?
If a person, falls under the following circumstances, he or she is eligible to be called a disabled dependent under section 80DD and hence the person’s caretaker can avail the income deductions:
- Individuals, or a spouse, son or daughter (or any child), parents as well as brother or sister i.e. any siblings can be considered as your disabled dependant.
- This is applicable for any hindu undivided Family which means that any member of the HUF can be a disabled dependant.
- It is essential that the disabled individual be wholly or mostly dependant on the taxed for their support as well as maintenance.
- He or she should also not claim the deduction under section 80U.
What kind of Disability or Severe Disability is considered under the Section 80DD?
Disability for Section DD is defined under clause (i) of section 2 by the “Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995” as well as disabilities includes in clauses (a), (c) and (h) of section 2 of National Trust for welfare of Person with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999.
Hence this includes the following disabilities:
- Cognitive or severe mental disabilities
- Low vision
- Hearing impairment
- Locomotor disability
- Mental illness
- Cerebral palsy
- Or Multiple disabilities
It is essential to note that person must not suffer less than 40% of any of the above disabilities. When it comes to sever disability 80% or above of one or more of the mentioned illnesses or disabilities is considered.
Other Things To Note For Claim Deduction
- A medical certificate is mandatory when one wishes to claim the deduction with respect to the mentioned disabilities from any Government Hospital. The document should certify the disability of the dependant and the person they are dependant on. The certificate needs to be renewed periodically.
- Individuals suffering from Autism, Cerebral Palsy or any multiple disabilities, would require form number 10-IA to be filled and submitted for them.
- There are also 2 formats other than the one mentioned earlier, for an individual who is suffering from any sort of severe mental illnesses and the rest of the disabilities.
- Individuals also have to submit a self declaration, signed and certifying the expenses incurred pertaining to the medical treatment which includes nursing, rehabilitation as well as training of the disabled dependant.
- It is not required to preserve the actual receipts for the disabled dependants expenses. But the actual receipts need to be submitted in case the claim deduction with respect of payment made to any insurer such as LIC, UTI and others for getting insurance plans or schemes for the maintenance of the disabled dependant.
Where can you avail a Medical Certificate for the Disabled Dependant?
According to the income tax laws the following people can help you get a medical certificate to claim ta deductions under section 80DD:
- A neurologist with a Doctor of Medicine (MD) degree in Neurology or a Pediatric Neurologist with a similar degree for children.
- A Civil Surgeon or a Chief Medical Officer (CMO) of any government hospital.
Tax Deduction Under Section 80DD For Disabled Dependants
Before going forward it is essential to understand that in the case that a disabled dependant dies before the taxed individual he or she will be taxed for the premium amount paid in that year, since this would be treated as the survivor’s income for that year and hence be completely taxable.
- The income tax deduction which is allowed, under section 80DD is Rs. 50,000 for what is defined earlier as disabled dependant (40% and over disability) This limit went upto Rs. 75,000 since 2016.
- The income tax deduction which is allowed, under section 80DD is Rs. 50,000 for what is defined earlier as severely disabled dependant (80% and over disability) This limit went upto Rs. 1,25,000 since 2016.
- Deduction is not dependant on the amount of expenses incurred regardless the real expenses disabled dependent relative is lesser than amount mentioned above, the tax assessed will be eligible for the full deduction.
Conditions for Tax Deduction under 80DD
- People need to produce a hard copy of the medical certificate stating disability as issued by the central or state government medical board to make the deduction claim.
- The insurance plan should be in the tax assessor's name and also must be a life insurance policy and not a health insurance policy. It could also pay annuity or simple lump sum amount as death benefit for the disabled dependant in the case of your untimely death.
- Incase the disabled dependent dies earlier than the taxed, the policy amount is returned to him or her and hence would be treated as income and hence taxed for income.
Deductions Under Section 80DD FAQs
- Who qualifies for deductions under Section 80DD of the Income Tax Act?
- Who is considered as a disabled dependent for tax purposes under Section 80DD of the Income Tax Act?
- What are the expenses that can be claimed as deductions under Section 80DD of the Income Tax Act?
- What is the maximum deduction amount under Section 80DD of the Income Tax Act?
- What are the disabilities for which I can claim deductions under Section 80DD of the Income Tax Act?
Individuals and Hindu Undivided Families who are Indian residents can claim deductions under Section 80DD of the Income Tax Act. Please note that non-resident individuals are not eligible to claim deductions under this section.
So far as individuals are concerned, their spouse, children, siblings and parents are considered as disabled dependents under Section 80DD of the Income Tax Act. For Hindu Undivided Families any member of the Hindu Undivided Family can be a disabled dependent.
Expenses incurred on medical treatment, rehabilitation, training or nursing of a disabled dependent can be claimed as deductions under Section 80DD of the Income Tax Act. Even expenses incurred on premium payments on certain insurance policies that are especially designed for such cases can be claimed as deductions provided that the policy satisfies the conditions prescribed in the law.
The maximum deduction amount that can be claimed under Section 80DD of the Income Tax Act will vary based on the disability of the dependent. For instance, a dependent who has a minimum of 40% of a certain disability is regarded as a person with disability, and the individual who incurs costs on medical expenses of such a dependent can claim a maximum deduction of Rs.75,000 under Section 80DD of the Income Tax Act. Dependents who have a minimum of 80% of any disability are regarded as persons with severe disability, and the individual who incurs costs on the medical expenses of such a dependent can claim a deduction up to Rs.1.25 lakh under Section 80DD of the Income Tax Act.
The disabilities which qualify for tax benefits under Section 80DD of the Income Tax Act include blindness, loco motor disability, low vision, mental illness, mental retardation, leprosy-cured, hearing impairment, cerebral palsy and autism.