Section 80DD of the Income Tax Act

Taxation can often seem overwhelming, especially when you have dependents with special needs. Fortunately, Section 80DD of the Income Tax Act offers significant relief to individuals and Hindu Undivided Families (HUFs) who support disabled dependents. This section provides a flat deduction, regardless of the actual expenditure incurred, to ease the financial burden associated with caring for a disabled family member. Let’s explore Section 80DD in detail, covering its benefits, eligibility criteria, and how it can help you manage your tax obligations more effectively.

What Is Section 80DD of the Income Tax Act?

Section 80DD of the Income Tax Act allows taxpayers to claim a deduction for expenses incurred on the medical treatment, training, and rehabilitation of a disabled dependent. This deduction also extends to insurance premiums paid for the care of the dependent. The aim of Section 80DD is to reduce the financial strain on families by providing a fixed deduction amount, regardless of the actual expenses incurred. It’s essential to understand that this section benefits not only individuals but also Hindu Undivided Families (HUFs). Note that Section 80DD Income Tax would not apply to the person incurring expenses if the differently challenged person is also claiming a deduction under Section 80U.

Also Read More About Section 80

Who Can Claim Deductions Under Section 80DD?

To qualify for deductions under Section 80DD, the following criteria must be met:

1. Only resident individuals and Hindu Undivided Families (HUFs) are eligible for this deduction. Non-resident Indians (NRIs) cannot claim benefits under this section.
2. Dependents for individuals can include a spouse, children, parents, brothers, or sisters. For HUFs, any member of the HUF is considered a dependent. The key condition is that the dependent must be wholly or substantially reliant on the taxpayer for financial support.
3. Taxpayers cannot claim deductions for their own medical expenses under Section 80DD.
4. To qualify for the deduction, there must be either medical expenses incurred for the treatment of the dependent or deposits made under an insurance scheme, such as with LIC or another approved insurer.
5. To claim the deduction, you must provide a medical certificate issued by a recognised medical authority in Form 10IA.

What Disabilities Are Covered Under Section 80DD?

Section 80DD provides tax relief for a broad range of disabilities. Here’s a detailed look at the types of disabilities covered:

1. Autism: Also known as Autism Spectrum Disorder (ASD), this is a complex condition affecting social interactions, language, and communication. It often involves repetitive behaviours and difficulties in adapting to changes.
2. Blindness: This includes complete loss of sight or significant visual impairment, such as visual acuity up to 6/60 or 20/200 or a restricted field of vision that limits everyday activities.
3. Cerebral Palsy: A condition caused by brain injury or abnormal brain development during early life. It affects motor skills and muscle control, leading to difficulties with movement and posture.
4. Hearing Impairment: Refers to a significant loss of hearing ability, typically 60 decibels or more, which prevents a person from hearing normal conversations.
5. Leprosy-Cured: Individuals who have been cured of leprosy but still experience physical challenges. This can include loss of sensation in limbs, eye problems, or significant physical deformities that impact daily activities.
6. Locomotor Disability: This includes disabilities affecting the bones, joints, or muscles, leading to severe restrictions in limb movement or coordination.
7. Low Vision: People with low vision have impaired sight, even with treatment or corrective lenses. They can use their vision with special aids for tasks and activities.
8. Mental Illness: A broad category covering various mental health conditions that are not classified as mental retardation.
9. Mental Retardation: This refers to incomplete or blocked mental development, often characterised by below-average intellectual functioning.

How Much Can You Deduct Under Section 80DD?

The 80DD tax benefit varies based on the severity of the disability:

1. Disability Over 80%: ₹1.25 lakh
2. Disability Between 40% and 80%: ₹75,000

Example: If Raghu, a resident individual, deposits ₹40,000 annually with LIC for his disabled sister’s maintenance, he can claim a deduction of ₹75,000 if the disability is between 40% and 80%. If the disability is 80% or more, the deduction can go up to ₹1.25 lakh, even if the actual expenditure is less.

What Documents Are Required to Claim Deductions Under Section 80DD?

To claim deductions under Section 80DD, the following documents are necessary:

1. Medical Certificate: Obtain a certificate from an approved medical practitioner, such as a neurologist, pediatric neurologist, or Chief Medical Officer (CMO) from a government hospital. This certificate should confirm the nature and extent of the disability.
2. Proof of Expenditure: While detailed expense documentation is not mandatory, maintaining medical records and prescriptions is advisable.
3. Disability Certificate Validity: A disability certificate must be valid for the relevant financial year. If it expires, a new certificate must be obtained for the subsequent fiscal year.

How to Claim Deductions Under Section 80DD?

The individual making the deduction claim must keep a copy of the certificate issued by the medical authority in the relevant format, Form 10-IA, and in the requisite manner on hand. It is advisable to have the paperwork on hand even if almost no document is needed to be attached to the ITR.

Section 80DD vs. Section 80U

While both Section 80DD and Section 80U offer tax benefits for disabilities, there are key differences:

• Section 80U provides deductions directly to the taxpayer who is disabled. If you are an individual with a disability, you can claim this deduction for yourself without having to show proof of expenses incurred for treatment or care. The amount you can deduct depends on the severity of your disability.
• Section 80DD, on the other hand, is intended for taxpayers who are supporting a disabled dependent. This could be a family member such as a spouse, child, parent, or sibling. To claim this deduction, you need to provide proof of the disability and demonstrate that you are incurring expenses for the dependent’s care, or you may claim deductions on the premiums paid for insurance policies taken out for their benefit.

Conclusion

Section 80DD of the Income Tax Act is a valuable provision for families supporting disabled dependents. It provides a significant deduction amount, easing the financial burden associated with medical care and rehabilitation. By understanding the eligibility criteria, types of disabilities covered, and the deduction process, taxpayers can effectively leverage this section to manage their tax liabilities better.

With recent updates and a higher deduction limit, it has become an even more beneficial provision, ensuring that the increasing costs of medical care are more manageable.

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