What is Section 80DD?

The Section 80DD was a part of the Income Tax Act, 1961. It is the deduction for the medical maintenance of a dependant, who is a person with a major disability. The assessee should be an individual or a Hindu Undivided Family (HUF) who should be a resident of India. This assessee may claim a tax deduction under the Section 80DD in the following two conditions. Firstly, the assessee being a person with a disability during the previous year should have incurred some expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant. Secondly, the assessee during the previous year should have paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any insurer company subject as specified in sub-section (2) and once approved by the board, the dependant as per the provisions of the section, is allowed a deduction of INR 50000 from the total income in respect of his salary as recorded for the previous year.

There are several clauses and provisions of the section which shall be clarified subsequently in this article.


What is the specified amount claimed under Section 80DD?

The maximum deduction to be claimed under Section 80DD can be up to INR 75000 for the defined disabled dependants. The disability is also categorised such that if the disability is a “severe” one, the maximum deduction can be extended up to INR 1.25 lakhs. The deduction to be claimed is not dependent on the actual amount which is incurred by the assessee in the said treatment. Thereby, the full deduction can be claimed under the Section 80DD even if the actual expenses on the said disabled dependant are less than the mentioned amount. It should be made clear that in the case that the disabled dependant dies before the taxpayer, the taxed individual shall be taxed for the premium amount which is paid in the year which is treated as the survivor’s income for that year and hence in entirely eligible for tax deduction.

The following are the specifics of the amount that can be taken as a tax deduction under Section 80DD for disabled dependants.

  • Under Section 80DD, the income tax deduction allowed is INR 75000( 40% disability)
  • The income tax deduction was allowed up to INR 50000 for individuals certified as "severely disabled" i.e. 80% disabled or more. The limit was extended up to INR 125000 in 2016.

Who are eligible for deduction under Section 80DD?

One can be eligible for deduction under Section 80DD in the following two conditions-

  • An Individual with a Disabled Dependant in which case the individual taxpayer under Section 80DD can claim a tax deduction for the expenses relating to a dependant who should be a direct relative of the individual like a spouse, parent, brother, sister or children.
  • A Hindu Undivided Family (HUF) with a disabled dependant in which case the deduction can be claimed to support a disabled dependant who is a member of HUF.

The disability implied here means a person suffering from more than 40% disability, which can be certified by the respective doctor. The maximum amount can vary if the disability is categorised as a "severe" one.

The expenses can be incurred by the taxpayer to provide any type of medical treatment be it nursing, training or rehabilitation of the dependant person. The taxpayer can also claim a deduction if any payment of deposit has been made under any scheme of maintenance as operated by Life Insurance Corporation or any insurance company or Jeevan Aadhar Plan or the Unit Trust of India. However, it should be noted that if the disabled dependant is already claiming tax under Section 80U, then Section 80DD would stand null for the assessee.


What are the claims and conditions associated with Section 80DD?

The following terms and conditions should be noted in order to claim a tax deduction under Section 80DD-

  • The disabled dependant individual should be wholly or to a major extent be dependent on the taxpayer for medical support and maintenance.
  • The taxpayer won’t be able to claim any deduction under Section 80DD if the dependant has claimed a deduction under Section 80U by their own capacity.
  • NRIs (Non Regional Indians) are specifically barred from claiming tax benefits from Section 80DD like most other sections of the Income Tax Act. A person must be essentially a resident of India to claim the tax deductions.

What are the different diseases covered by the Section 80DD?

The following diseases or disabilities are covered by the Section 80DD of the Income Tax Act.-
  • Autism- It is also called autism spectrum disorder (ASD) and is a complex neurobehavioral condition that is seen as impairment in social interaction and development of language and communication skills involving rigid, repetitive behaviours.
  • Blindness- The visual impairment where the person suffers any of the given conditions- total absence of sight, visual activity up to 6160 or 201200 (snellen) in the better eye with correcting lenses or limitation of the field of vision of the eyes subtending an angle of 20 degrees or worse.
  • Cerebral palsy- The condition involves a set of non-developmental conditions for an individual and can be characterised 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.
  • Hearing impairment- The hearing problem implies a loss of sixty decibels or more in the better of the two ears in the conversational range of frequencies such that the person can’t hear a normal conversation.
  • 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 as the following. There is the loss of sensation in hands or feet or both along with a loss of sensation and paresis in the eye and eye-lid with no manifest deformity. If not that, 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.
  • Loco-motor disability- This impairment involves any disability in the bones, joints muscles leading to substantial restriction of the movement of the limbs or any form of cerebral palsy.
  • Low vision- A person with low vision means someone with an 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 appropriately designed assistive decide. Mental illness- This would include a vast range of mental disorder but is essentially not any form of "mental retardation". Mental retardation- This means a condition where there is a completely blocked or incomplete development of the mind of a person which is especially characterized by sub-normality of intelligence.

What is a “disability” to claim deduction under Section 80DD?

The definition of disability under Section 80DD is taken from the “Persons with Disabilities Act, 1995” which is also known as the “Equal Opportunities, Protection of Rights and Full Participation Act” and 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 suffering from 40% suffering as certified by a credible medical authority.


What is the procedure to claim a tax deduction under Section 80DD?

The following steps and methods should be noted in order to claim a deduction from Section 80DD-

  • Amongst the most important steps in issuing the medical certificate, this certificate should be issued by an authorized Government Hospital and must certify the disability of the person along with the person on whom they are dependent upon. It is also compulsory for this certificate to be issued periodically.
  • For individuals who are suffering from autism, cerebral palsy or multiple disabilities, an additional form number 10-IA must be filled and submitted.
  • Forms and their formats must be noted while filling them up and submitting them which is available in different formats and depends on the disease of the disabled person.
  • Individuals must submit a self-attested declaration which should certify the expenses incurred with respect to the specific treatment and must include the expenses of nursing, rehabilitation and training for the said individual.
  • The receipts pertaining to the actual expenses for the disabled person need not be retained. However, in the case of a tax deduction with respect to payment to an insurer like LIC, UTI or any medical insurance company, the actual receipts must be preserved and submitted for reference.

What are the necessary documents required to claim a tax deduction under Section 80DD?

The following certificates are necessary in order to claim a deduction under the Section 80DD-

  • Medical Certificate from an authorised medical practitioner. The following persons are deemed credible for such a certificate.
    1. A neurologist with a Doctor of Medicine (MD) degree or an equivalent qualification.
    2. A Pediatric Neurologist for children or a similar degree.
    3. A Civil Surgeon or a Chief Medical Officer (CMO) from any Government hospital.
  • Form 10-IA for a disabled dependant suffering from Autism, Cerebral Palsy or multiple disabilities.
  • Self-Declaration Certificate to be submitted by the taxpayer mentioning the expenses for the medical treatment on the disabled dependant.
  • Receipts of Insurance Premium Paid in the case when the claim is made for payments made towards a medical insurer company.

What are the conditions for insurance or deposit for the disabled dependant to claim deduction under Section 80DD?

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

  • The disabled dependant must be nominated. The assessee must nominate either the dependant, being a person with disability or any other person or a trust to receive the payment on the assessee’s behalf for the benefit of the dependant. However, if the dependant being disabled happens to pass away the individual taxpayer, an amount equal to the amount paid or deposited shall be deemed to be the income of the assessee in the previous year when the amount was received by the assessee and so is accordingly chargeable to tax as the income of the previous year.
  • The payment of annuity or lump sum amount is provided by the scheme for the benefit of the dependant, being a person with a disability, in the unfortunate event of the death of the assessee in whose name the subscription to the scheme is made.

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

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


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

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

Under the Section 80 DD, the tax deduction can be claimed by residents of India or HUFs for the medical treatment of a “dependant” with disabilities. The deduction amount covers the premiums paid to insurance companies towards specified insurance plans which are designed for the disabled dependant. The maximum amount can be claimed for the tax deduction, irrespective of the actual sum paid for the medical expenses incurred. The maximum amount varies if the disability is certified as above 40% or 80%. In the case of disability above 40%, the limit is INR 75000 and in the case of above 80% or severe cases, the limit is INR 125000.

Under the Section 80DDB, the tax deduction is claimed by the taxpayers who have dependants suffering from specified disabilities and the dependant is defined as anyone among the spouse, children, siblings or parents of the taxpayer. The tax deduction claimed by the individual has a cap of INR 40000 or the paid sum in the medical expenses, whichever is lesser. If the individual is a senior citizen, the tax benefits are extended up to INR 100000 or the actual sum paid, whichever is lesser.

Under Section 80D, the tax deduction can be claimed for the premium amounts paid to a health insurance policy. The limits are set depending upon which members of the family are ensured under the policy and varies accordingly. Additional tax deductions can be availed for expenses on medical or preventive check-ups. Tax benefits can also be claimed for premiums paid toward health insurance riders and critical health insurance policies. However, the section does not cover premiums paid for personal accident policies or personal accident riders.

Therefore, these marked differences can greatly influence your decision to claim your tax benefits from the three different sections.


Conclusion

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


Frequently Asked Questions (FAQs)

Q - What are the different tax deduction sections for people with disabilities?

There are several sections in the Income Tax Act to serve people with disabilities. The Section 80DD can be claimed by the taxpayer for the expenditure on a dependant person with a disability as certified by a medical authority. The Section 80U can be claimed by the person with disability himself. The deductions are made in respect to any expenditure on medical treatment including nursing, training and rehabilitation of a dependant, being a disabled person as defined by the respective sections. The deductions allowed are INR 75000 for a disabled person and INR 125000 for a severely disabled.


Q - Who is the “dependant” with reference to the Section 80DD?

As per the Section 80DD, a “dependant” means any of the immediate family members of an individual who is totally dependent on the person for all their medical expenses. These immediate family members means, any person among the husband or wife, children, and the parents. The brothers and sisters of the individual or the same of the individual’s parents or the spouse can also come under the “dependant” of the taxpayer. In the case of a Hindu Undivided Family, the dependant would be a member of the family who is majorly dependent on such an individual or HUF for his support and maintenance who has not claimed any deduction under Section 80U for the relevant FY.


Q - How can the taxpayer claim the entire amount of deduction irrespective of the actual expenditure?

The taxpayer can easily claim the entire amount of deduction irrespective of the actual amount of expenses incurred in the respective medical treatment. The procedure remains the same as the normal application for the deduction under Section 80DD by filling the required form and provided the documents included the certificate for the disabled person. The amount of the deduction is INR 75000 for 40% disability and INR 125000 for 80% disability and one can easily claim the entire amount without going for any different proceedings.


Q - Can the disabled person claim the deduction under Section 80DD by himself?

No, the disabled person cannot claim a deduction under Section 80DD by himself or herself. The disabled person must be a “dependant” of the taxpayer and the taxpayer must be someone among the close family members to claim the deduction i.e. the spouse, parents, children, brothers or sisters. The disabled person must be dependent on the taxpayer for all their support and medical maintenance. The taxpayer is therefore eligible to claim for the tax deduction from the income tax based on the severity of the disability of the person with disability. The Section 80U can be useful for a person with disability who wants to claim the deduction by himself.


Q - Can a person claim tax deduction for a distant relative who is totally dependent on the taxpayer for medical expense?

No, it is strictly mentioned among the clauses of Section 80DD defining who a “dependant” can be. The dependant can only be one of the following for a single case- the wife or husband, the children, the parents, the brother, the sister, the parents’ brother or sister and the wife’s or husband’s brother or sister. Thereby, anyone outside this family circle cannot be claimed as a “dependant” for the individual taxpayer. It is made clear that cousins, friends or any other close association outside the immediate family circle cannot be a “dependant” under Section 80DD even if the person is wholly dependent on the taxpayer for their support.

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.