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When a family member is partially or substantially disabled, there is a continuous stream of expenses that you will have to incur on that family member. There are a variety of neurological disorders that are chronic in nature and require long-term care. It is for this reason that the Income Tax Act has provided for a special Section 80DD, which provides an additional rebate if one of your family members is differently-abled or physically challenged. Such persons require continuous care and attention and the costs can add up to quite a bit. This Section 80DD is basically intended as an exemption from total income when you have a relative dependent on you who is differently abled. Relative here is restricted to spouse, children, parents and siblings only. Other relatives will not entitle you to this benefit.
Before going ahead on this discussion on Section 80DD, we need to understand the key distinction between Section 80DD and Section 80U. The limits and conditions are the same in both the sections. The only difference is that Section 80U is utilized when the differently-abled person claims the tax benefit. If the differently abled person has a steady source of income, then they can claim tax benefits under Section 80U. The same benefit can be claimed by an assessee on behalf of his/her relatives if the differently-abled person is dependent on them. The key here is that if the person is already claiming benefits under Section 80U for the disability, then you cannot claim benefits under Section 80DD, by showing that the said relative is dependent on you. The two sections are structured in such a way that you can only use one of them; either Section 80DD or Section 80U. This understanding is fundamental to the understanding of this section. Now, let us first get to the nitty-gritty of Section 80DDB.
Who can claim Section 80DD benefits and under what circumstances?
Deduction under section 80DD of the income tax act is allowed only to Resident Individuals or Hindu Undivided Family (HUF) on behalf of a dependant relative who is differently abled (the Act clearly defines what is a differently-abled person and the conditions to be met) and is wholly dependent on the individual (or HUF) for support & maintenance.
To be eligible for Section 80DD benefits, the assessee needs to meet the following conditions.
What is the amount of deduction that the assessee can claim under various conditions?
The table captures below the extent of disability and how it determines the exemption available under Section 80DD of the Income Tax Act.
|Extent of Disability||Exemption for FY 2018-19||Exemption prior to FY 2015-16|
|Disability less than 40%||Nil||Nil|
|Disability from 40% to 80%||Rs.75,000 per annum||Rs.50,000 per annum|
|Disability above 80%||Rs.1,25,000 per annum||Rs.1,00,000 per annum|
In the above table, it can be seen that currently, the Section 80DD exemption is available in case of the disability being above 40% only. Any disability below 40% does not make you eligible to claim deduction under Section 80DD of the Income Tax Act.
Mayank’s cousin brother is physically challenged by early stages of cerebral palsy, and Mayank has been spending Rs.25,000 each month for his treatment. His doctors have certified as a person with 50% disability. He has been told by his friend that he can claim deduction under Section 80DD. How much is Mayank entitled to claim?
In this case, the afflicted person is a cousin brother of Mayank. The Income Tax Act only permits such deductions under Section 80DD for relatives and that includes spouse, children, parents, and real siblings. In this case, Mayank has been spending the money for his cousin brother (who does not fall into the definition of eligible relative). Hence, Mayank will not be entitled to any tax benefit under Section 80DD.
Raghav’s father and mother are both dependent on him. Both are classified as differently abled. While his father has certified 60% disability, his mother has certified 85% disability. During the last year, he spent Rs.50,000 on his mother’s treatment and Rs.35,000 on his father’s treatment. How much deduction is Raghav eligible under Section 80DD of the Income Tax Act?
There are some basic points we need to understand in Raghav’s case. Let us highlight the key points below:
Chandresh is spending Rs.10,000 on his sister’s treatment of a degenerative disease. His sister is claiming benefits under Section 80U. Can Chandresh also claim exemption under Section 80DD?
As has been stated clearly, Section 80U and Section 80DD are mutually exclusive to each other. If Chandresh’s sister who is differently-abled is already claiming the exemption under Section 80U, Chandresh will not be eligible to claim under Section 80DD. Only one of them can claim this benefit.
Partho Ghosh, an NRI based out of Dubai has taken an insurance policy on behalf of his younger sister in India who is suffering from a locomotor disability. Does the insurance premium payment qualify as spending under Section 80DD?
There are two parts to this question. Firstly, does the insurance policy premium payment for disability qualify as an expense? The answer is that it does qualify as an expense and entitles you to tax exemption under Section 80DD of the Income Tax Act. However, in this case, it needs to be noted that Partho Ghosh is an NRI settled in Dubai. This Section 80DD exemption is only available to resident Indians and to HUFs. Since Partho Ghosh is an NRI, he will not be eligible to claim exemption under Section 80DD of the Income Tax Act.
Who is eligible for claiming Deduction under Section 80DD
How does the Income Tax Act define a Disabled Dependent under Section 80DD?
Note: The disabled person should be dependent on the person claiming deduction and should not have claimed deduction under Section 80U of the Income Tax Act. List of expenses that are eligible for deduction under Section 80DD exemption
What is the total exemption available under Section 80DD of the IT Act?
Deduction allowed varies depending on whether the dependent person has disability or severe disability. This is defined in terms of percentage of disability.
A. Dependent person with disability
B. Dependent person with severe disability
|Table Showing Tax Deduction under section 80DD|
|Type||Amount (in Rupees)|
|Dependent person with disability||Rs.75,000|
|Dependent person with severe disability||Rs.1,25,000|
What are the specific disabilities that are covered under section 80DD
As per the Income Tax Act 1961, a comprehensive list of such disabilities have been identified for this purpose. The following disabilities are covered under section 80DD of the Income Tax Act, 1961:
Do you require certification from a qualified doctor?
The Income Tax Act has identified and authorized specific medical officers to certify the existence of the disability and also the nature and extent of the disability. Such authorized persons under the act include:
What are the documents required to claim deduction under section 80DD?
The section 80DD is all about providing tax deductions to individuals and/or HUFs for caring for a disabled dependent. The assessee will require the following documents to claim tax benefits of section 80DD.
Manek has spent Rs45,000 as expenses for caring for his disabled and dependent wife. How much deduction can Manek claim u/s 80DD for the year?
Incidentally, Manek can claim the full amount of Rs.75,000 as deductions under this section in case his wife is disabled dependent and Rs.1.25lakh in case she is a severely disabled dependent, irrespective of the amount actually spent during the year on care.
Section 80DDB (A slight variation of Section 80DD)
For certain specific diseases, Income Tax Department offers tax benefits to the individual u/s 80DDB on the basis of expenses actually incurred by the assessee for the treatment of such diseases or ailment.
Eligibility criteria for deduction u/s 80DDB
Who qualifies as a dependent?
For the purpose of this section, dependents fall in two categories:
Specified diseases or ailments
The following diseases specified under rule 11DD qualify for tax deduction u/s 80DDB. However, a prescription in respect of diseases or ailments is required from the specialists as mentioned below:
In case the person being treated was treated in a government hospital, the prescription may be issued by any specialist working full-time in that hospital and having a post-graduate degree in General or Internal Medicine or any equivalent degree, which is recognized by the Medical Council of India.
The prescription should contain the name and age of the patient, name of the disease, or ailment along with the name, address, registration number, and the qualification of the specialist issuing the prescription.
If the patient is receiving treatment in a government hospital, such prescription shall also contain the name and address of the government hospital.
Deduction limit u/s 80DDB
The deduction limit depends upon the actual expense incurred and age of the person for whose treatment the money was spent.
|Age of person who underwent treatment||Total amount of deduction allowed to assessee|
|Up to 60 years||Least of actual amount spent or Rs.40,000|
|Senior citizen (60-80 years)||Least of actual amount spent or Rs.60,000|
|Super senior citizen (above 80 years)||Least of actual amount spent or Rs.80,000|
Amount of deduction allowable under this section as per the limits mentioned above will be reduced by the amount received (if any), under an insurance from an insurer, or reimbursed by an employer, for the medical treatment of the person specified. Only the net amount will be admissible under Section 80DDB in such cases.