Section 80DD Income Tax Deduction for Medical Treatment of Disabled Dependent

What is Section 80DD of income tax?

Section 80DD is the deduction available to the resident individual or HUF for the medical treatment of a disabled dependent.

The conditions to claim this deduction include:

• The deduction is allowed only to the dependants of the taxpayer and not the taxpayer himself.
• Dependents in the case of individuals include parents, brothers, sisters, spouse, and children of the taxpayer. In the case of HUF, dependants include the members of HUF.
  • Incurred expenditure for the medical treatment (including nursing), training, and rehabilitation of disabled dependents.
  • The disability of the dependant should not be less than 40%. as defined under section 2(i) of the Persons of disabilities act, 1995.
  • Paid/deposited amount under a scheme approved by CBDT, framed on this behalf by the Life Insurance Corporation, Unit Trust of India, or any other insurance company giving policy specifically meant for taking care of the dependent.

However, it should be noted that if the differently disabled individual is already claiming a deduction under Section 80U, then Section 80DD would not be applicable to the person who is incurring expenditure.

What are the Eligibility Criteria For Section 80DD ?

1. Resident Individuals and HUF can claim deductions for the disabled dependent. NRIs are not eligible for this deduction.
2. In the case of an individual, dependents can be any family member like a spouse, children, parents, brothers, and sisters of the taxpayer. While for HUF, dependents can be any member of HUF. Dependency can be understood as the disabled individual is wholly or to a large extent dependent on the assessee for their support.
3. Tax-payers cannot claim a deduction for their medical expenditure on themselves under this Section.
4. There should be either expenditure for the medical treatment of the dependent or deposit of any amount under the scheme of LIC or another insurer as discussed above.
5. The assessee, claiming a deduction under this section, shall furnish a copy of the certificate issued by the medical authority in Form 10IA.

What is the meaning of “dependents” under section 80DD?

For the purpose of section 80DD, dependents mean

• Spouses
• Children
• Siblings
• Parents
• Members of HUF

For claiming the deduction, the above-mentioned individuals should be completely or majorly dependent upon the taxpayer for their support and maintenance.

What is the meaning of “disability” for 80DD?

The definition of disability under Section 80DD of the income tax act is taken from the “Persons with Disabilities Act, 1995” and includes autism, cerebral palsy, and multiple disabilities as provided for in the "National Trust for the Welfare of Person with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities Act, 1999."

Therefore, a "Person with Disability" implies a person having 40% suffering as certified by a credible medical authority.

What are the different diseases covered under Section 80DD?

The following disabilities are covered by Section 80DD of the Income Tax Act.-

1. Autism- It is also called autism spectrum disorder (ASD) and is a complex neurobehavioral condition that is seen as an impairment in social interaction and the development of language and communication skills involving rigid, repetitive behaviors.
2. Blindness- The visual impairment where the person suffers any of the conditions like the total absence of sight, visual acuity up to 6/60 or 20/200 (Snellen), or limitation of the field of vision of the eyes subtending an angle of 20 degrees or worse.
3. Cerebral palsy- The condition involves a set of non-developmental conditions for an individual and can be characterized by an abnormal motor control posture resulting from brain insult or injuries occurring in the pre-natal, perinatal, or infant phases of development of an individual.
4. Hearing impairment- The hearing problem implies a loss of sixty decibels or more in any of the two ears in the conversational range of frequencies such that the person can’t hear a normal conversation.
5. Leprosy-cured- A person who is leprosy-cured means that the person has been cured of leprosy but still has a set of physical setbacks. There is a loss of sensation in hands or feet or both, along with a loss of sensation and paresis in the eye and eyelid with no manifest deformity. If not, there is manifest deformity and paresis. There is sufficient mobility in their hands and feet which enables them to engage in normal economic activity. If not any of these, there is extreme physical deformity as well as advanced age, and the combined effect prevents the person from undertaking any beneficial occupation.
6. Loco-motor disability- This impairment involves any disabilities in the bones, joints, or muscles leading to substantial restriction of the movement of the limbs or any form of cerebral palsy.
7. Low vision- A person with low vision means someone with impairment of normal visual functioning despite treatment or standard refractive correction. Thereby, the person has to use or is capable of using vision for the planning or execution of a task with an appropriately designed assistive device.
8. Mental illness- This would include a vast range of mental disorders but is essentially not any form of "mental retardation."
9. Mental retardation- This means a condition where there is a completely blocked or incomplete development of the mind, especially characterized by sub-normality of intelligence.

What is the amount of deduction under section 80DD?

This section provides a fixed deduction, it does not depend on the age and the amount of expenditure. In the case of

• Normal Disability( i.e., more than 40% but less than 80%), the fixed deduction allowed from gross total income is Rs. 75,000.
• For severe Disability (i.e., more than 80%), the fixed deduction allowed from gross total income is Rs.1,25,000.

Full deduction can be claimed under Section 80DD even if the actual expenses on the said disabled dependant are less than the mentioned amount.

Example for calculating 80DD Deduction Amount:

Ram is a resident individual. He deposits Rs.40000 annually with LIC for the maintenance of his handicapped sister, who is wholly dependent on him. What is the amount of deduction u/s 80DD?

For claiming 80DD deductions, let’s first check the conditions:

• Ram is a resident individual.
• He is paying the amount in the LIC scheme approved for the deduction.
• Sister is covered under the definition of disabled dependent.

Therefore, he can claim a deduction of Rs.75000. However, if the disability is 80% or more, he can claim Rs.125000 deduction.

How to claim a deduction under Section 80DD?

The person claiming the deduction is required to keep handy a copy of the certificate issued by the medical authority in the prescribed form, i.e., Form 10-IA, and in the prescribed manner. Since practically no document is required to be attached with ITR, it is advised to keep the document handy.

Which medical certificate is required under section 80DD?

For claiming deduction under section 80DD medical certificate from an authorized medical practitioner is required. The following persons are deemed credible for such a certificate.

• A neurologist with a Doctor of Medicine (MD) degree in Neurology.
• A Pediatric Neurologist for children having a degree equivalent to a neurologist in MD.
• A Civil Surgeon or a Chief Medical Officer (CMO) from any Government hospital

Thus, it simply implies that if you are taking the deduction under this section, then keep the certificate with you, which you can take from the Authorized Medical Practitioner.

Also, it is suggested that the medical prescription and medical records be kept safe in case the income tax department asks for the same in the future.

The disability certificate has a specified validity. If the validity of the certificate expires in any financial year, the deduction for that financial year can be claimed using the expired certificate. However, from the next financial year, a new certificate would have to be availed to claim a deduction under Section 80DD in the next year.

What are the conditions for insurance or deposit for the disabled dependent to claim deduction u/s 80DD?

It has already been clarified that Section 80DD can be applied for insurance or deposits made in specified schemes for the maintenance of a disabled dependant. The following conditions should be observed for this insurance or deposit amount to be eligible for the scheme-

• The scheme should provide the payment of an annuity or lump sum amount to the dependent in the event of the death of the taxpayer.
• The taxpayer must nominate either the dependant, being a person with a disability or any other person or a trust to receive the payment on the assessee’s behalf for the benefit of the dependant.
• In Budget 2022, it is proposed to amend that and make a provision where deduction will also be available if the lump-sum payment or annuity is available to disabled persons during the lifetime of the subscriber on attaining the age of 60 years.

What will be the taxability of the amount received on the death of a disabled dependent?

In the case that the disabled dependent dies before the taxpayer, the amount paid or deposited in the scheme shall be deemed to be the income of the taxpayer in the year of receipt of the said amount.

What is the difference between Section 80U and Section 80DD?

While most of the benefits remain the same for Section 80U and Section 80DD. The basic difference is that while under Section 80U, the individual certified with a disability can claim the deduction, in Section 80DD, the deduction is claimed by the taxpayer, who bears the expense of the entire medical treatment of the individual who is defined as the disabled dependent. Most of the other details remain the same, including the specifics of the defined disabilities and the procedures to acquire the tax deduction.

The taxpayer cannot avail deduction under section 80DD if he/she has already claimed a deduction under section 80U.

What are the differences between Section 80DD, Section DDB, Section 80D, and Section 80U?

These four sections are very similar in the benefits they grant to the taxpayers. However, there are some basic differences that must be noted to claim their benefits accurately.

Let's have a concise look at these differences amongst the section 80DD,80U,80DDB, and 80D

Conclusion

Section 80DD is surely a boon for several Indian families who would be greatly benefitted from their medical expenses due to this. The amendments made in recent years ensure that as the medical field has expanded and problems have increased, there is a marked rise in the maximum limit of the amount eligible for deduction. Section 80DD must be distinguished clearly from other sections of the Income Tax Act providing similar benefits to taxpayers but with different specifics.

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