There are certain expenses that are incurred out of necessity rather than need or want, for instance the maintenance of a family member with a disability. If such expenses are made taxable, it becomes difficult for a person to manage his budget.
It is quite evident that medical treatments have consistently become expensive. In such cases, if the bread winner of the family has a responsibility of taking care of a family member who is dependent on care and concern of other family members, it becomes increasingly difficult for the family to funds the medical expense of the disabled. To avoid this, Indian law has laid down a provision in the Income Tax Act, 1961, for tax deductions under certain circumstances. Section 80 DD of the Income Tax Act deals specifically with persons with disability. The section speaks of Income Tax deductions with respect to maintenance including medical treatment of a dependent.
Who can be called a person with disability?
Any person who is physically or mentally incapable or restricted in some way to perform the regular activities as performed by a normal person is considered disabled. The percentage of disability determines the income tax deductions provided to the concerned relative of the disabled.
What does Section 80 DD say?
Section 80 DD provides for tax deduction for families taking care of a disabled family member so that they can take proper care of the dependent without any burden. It is to be noted that such deductions under section 80 DD can only be claimed by the family of the disabled person and not the person himself. In case the disabled person has already claimed deduction, section 80 DD will not be applicable to the family members.
Who are entitled to claim deductions under section 80DD?
As per section 80DD, income tax deductions can be claimed by an individual who belongs to a Hindu Undivided Family, as well as any other individual taking care of a disabled person in the family.
These deductions are applicable on the expenses that relate to caring of the disabled persons, such as medical expenses, medicines, etc. The amount also includes insurance premiums paid to the insurance agencies to cover the cost of maintenance of disabled person.
Terms and Conditions for applicability of 80DD
The deduction limit permitted u/s 80 DD is up to Rs. 75,000 in cases of disability up to 40%. The annual limit for availing deductions u/s 80 DD is Rs. 1.25 Lakhs per annum for taking care of a disabled person with disability up to 80% or more.
Dependents comprise of parents, spouse, siblings, children or any other family member who is under a HUF.
List of Disabilities included under the section:
- Low Vision
- Leprosy cured
- Locomotive disability
- Hearing impairment
- Mentally impaired
Things to Remember:
- Any proceeds received from an insurance policy in the event of the death of the dependent are liable for income tax deduction, as per the applicable tax brackets.
- The provision of deduction under section 80 DD is applicable over and above any other tax deduction claimed under other sections of the Act.
- The current limit of Rs. 75,000 as deductible income has only been approved from the accounting year 2015-2016, which previously was Rs. 50,000. The limit of Rs.1.25 Lakhs to severely-disabled has been increased from Rs. 1,00,000.
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Eligibility for Claiming Deductions u/s 80 DD
Given here are some of the conditions that you have to meet before you become eligible for the benefits under section 80 DD
- The deductions u/s 80DD is permitted in respect of the disabled person and not for the benefit of the person claiming it.
- In case where the disabled person has already claimed his/her tax deduction benefits, the taxpayer in that case, is not permitted to seek the benefits of tax deduction u/s 80DD.
- For the purpose of section 80 DD, ‘dependent’ includes spouse, children, parents or siblings. It may also include any such person who is under the care and protection of the HUF.
- Expenses incurred in case of the deductions sought must be of medical nature, like treatments, nursing or rehabilitation of the dependent.
- Disability has to be more than 40% for the person to be eligible for deductions under section 80 DD.
- Such deductions are given over and above your actual expenditure.
Some of the Frequently Asked Questions:
1. If I have spent 20,000 rupees in caring for my dependent family member, how much amount of the same am I entitled to claim under section 80 DD?
You are entitled to claim complete amount of 75,000 rupees as deduction for your disabled dependent and 1,25,000 rupees for a severely disabled dependent, depending on which category of disability applies to you, irrespective of what amount you may have spent on taking care of the dependent in that financial year.
2. Which are the relevant forms that I need to fill for claiming deductions under section 80 DD?
There are no specific forms to be filled as such. You just need to attach the certificates of disability from the medical authorities as specified by the state and accordingly claim deductions.
In case where the dependent is suffering from some neural disorder such as cerebral palsy, autism or more than one disability, you will be required to produce Form-10. This form needs to be signed by a certified neurologist. In case of children, a pediatric neurologist or a civil surgeon or chief medical officer has to certify the disability.
3. What are the kinds of expenditure covered under this Section?
The expenses that you can claim under this section have to be broadly related to the disabled dependent. It may be medical expenses, training and rehabilitation of the dependent, nursing expenses, etc. You can also claim for the premiums that you may have paid on insurance plans that were taken specifically for the benefit of the disabled person.