In India, taxes play an important role, as a major part of the government income is formed out of the taxes paid by the citizens. That’s why an individual is expected to file Income Tax Return (ITR) on time, in order to make payment of taxes, as per the prevailing tax slab rates, if he or she is earning above the exempted amount. Further, the concept of Income Tax Deduction helps the taxpayer in reducing the overall tax liabilities and assist in tax saving. Chapter VI A of the Income-tax Act, 1961, deals with the concept of deductions to be made while computing the total income. This chapter includes deductions from section 80 C to 80 U.
In this blog, we will be talking about section 80DD of the Income Tax Act, 1961. This section deals with the maintenance and medical treatment of the person under disability. All the Indian residents are entitled to claim tax deductions under Section 80DD of the Income Tax Act, 1961. Further, in order to claim the tax deduction, an individual is required to submit the medical bill, medical certificates, and all other required supportive documents. Furthermore, the cost of medical treatment, in the past few years has been rapidly rising, which has made quality medical treatment a difficult task, especially for the lower and middle-class section of the Indian society.
The Indian Government with the aim of providing relief to these groups of people especially the people dependent with some disability or with severe disability may now be offered some help by way of section 80 DD of the Income Tax Act, 1961. Before going into depth, it is significant to note that the Income Tax Authorities have the autonomy to make changes in the rates and minor amendments, but the relief aspect had to always be based on 1961.
What is the Eligibility Criteria for claiming this Deduction?
To be qualified for claiming the deduction under the section 80DD of the Income Tax Act, 1961, one must –
- Be an Individual or a part of a Hindu undivided family (HUF), who is a resident in India.
- This deduction is not available for an NRI (Non-Resident Indian), since a lot of countries like Canada, mainly help their residents or own people when it comes to medical treatment.
What are the Expenses that are deducted for the Income Tax Calculation?
The following are the listed expenses that are exempted from the income tax under section 80DD of the Income Tax Act, 1961–
- Any expenses which are incurred for the medical treatment, which also includes nursing, training as well as the rehabilitation of dependent who is disabled.
- The amount paid towards the LIC (Life Insurance Corporation), Unit Trust of India (UTI) or any other insurers with the sole purpose of buying the specified schemes or the insurance policies which assists in the maintenance and treatment of a dependant with disabilities.
Who is considered as Disabled Dependent according to the Income Tax Act, 1961?
If a person falls under any of the following circumstances, he or she is entitled to be called as a disabled dependent under the section 80DD of the Income Tax Act, 1961 and hence the person’s caretaker can avail the benefit income tax deductions –
- Individuals, son or daughter, or a spouse, or parents, even the brother or sister, i.e. any of the siblings can be considered as the disabled dependant.
- This is applicable for every Hindu Undivided Family (HUF), which means that any member of the HUF can be considered as a disabled dependant.
- It is significant to note that the disabled individual will be wholly or mostly dependant on the taxed deducted for their support, care and maintenance.
- Further, the disabled dependent must also not claim the deduction provided under section 80U.
What kind of Disability is included under section 80 DD of the Income Tax Act, 1961?
Disability required for the Section 80 DD is well defined under Section 2 clause (i) of the “Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995” and also includes disabilities mentioned in clauses (a), (c) and (h) of the Section 2 of the National Trust for welfare of Person with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999. Hence, the following are the disabilities which are included under section 80 DD of the Income Tax Act, 1961 –
- Cognitive or severe mental disabilities
- Low vision
- Hearing Impairment
- Locomotor disability
- Mental illness
- Cerebral palsy
- Or Multiple disabilities
Further, it is significant to note that the person concerned must not suffer less than 40 per cent of any of the above-mentioned disabilities. Furthermore, when it comes to severe disability, 80 per cent or above one or more of the above-mentioned illnesses or disabilities are considered.
What are the things to keep in mind before claiming Deduction of Section 80 DD?
- A Medical certificate is mandatory and obligatory when one wishes to claim the deduction provided under section 80 DD with respect to the above-mentioned disabilities from any Government Hospital. Further, the document should certify the disability of the dependant person and also the person on whom he or she is dependent. Lastly, the concerned certificate needs to compulsorily be renewed periodically.
- Individuals suffering from the diseases like the Autism, Cerebral Palsy or any other multiple disabilities, would need form number 10-IA to be duly filled and submitted for them.
- There are also two formats other than those previously mentioned, for an individual who is suffering from any kind of severe mental illnesses and the rest of the disabilities.
- Individuals are also required to submit a self-declaration, duly signed and certifying that the expenses incurred relating to the medical treatment which comprises of nursing, training and rehabilitation of the disabled dependent.
- Preservation of the actual receipts regarding the expenses incurred during the treatment of the disabled dependants is not required. But, the same actual receipts are required to be submitted in case of the claim deduction concerning the payment made to any insurer such as the LIC (Life Insurance Corporation), UTI (Unit Trust of India) and others for getting insurance plans or schemes for the maintenance and care of the disabled dependent.
Where can a person obtain a Medical Certificate for the Disabled Dependant?
As per the Income Tax Laws, following are the people who can help an individual in getting a medical certificate in order to claim tax deductions provided under Section 80DD of the Income Tax Act, 1961 –
- A neurologist who is having a degree of Doctor of Medicine (MD) in Neurology or a Pediatric Neurologist with a similar degree for the children.
- A Chief Medical Officer (CMO) or a Civil Surgeon of any government hospital
Tax Deduction available under Section 80DD for Disabled Dependants
Before going into depth, it is essential and necessary to understand that in the case where a disabled dependant dies prior to the taxed individual, then the concerned individual will be taxed regarding the premium amount paid in that financial year, as this would be considered as the survivor’s income for that financial year. Hence, all the income will be completely taxable.
- The tax deduction which is provided under the section 80DD is Rs 50,000 for what is previously defined as the disabled dependant (40 per cent and over disability) This limit went up to the limit of Rs 75,000 since 2016.
- The tax deduction which is provided, under the section 80DD is Rs 50,000 for what is previously defined as the severely disabled dependant (80 per cent and over disability) This limit went up to limit of Rs 1,25,000 since 2016.
- The Deduction is not available on the number of expenses incurred despite the fact that the real expenses incurred by the relative of the disabled dependent are lesser than the above-mentioned amount, the tax computed will be entitled to the full deduction.
What are the Conditions required to be fulfilled for availing Tax Deduction under Section 80 DD?
Following are the Conditions which are required to be fulfilled for availing Tax Deduction –
- People are required to produce a hard copy of the issued medical certificate declaring that the disability. The concerned medical certificate is issued by the Central or State government Medical Board and is required to avail the deduction claim.
- The insurance plan should be in the name of the tax assessor and compulsorily be a life insurance policy and not a health insurance policy. Further, it could also pay simple or annuity lump sum amount as the death benefit for the disabled dependant in the case of an untimely death.
- If in case the disabled dependent dies before then the person taxed, then the policy amount is refunded to him or her. Hence, the same amount would be treated as the income earned and hence will be taxable.
Also, Read: A Complete Overview of Section 80DD of the Income Tax Act, 1961