While healthcare in India is exempt from taxes, the hospital bills for treating critical diseases are still significantly high. To provide financial support, the Indian Income-tax Act introduced Section 80DDB in 1997 for Indian citizens. The provisions of this Act allow a significant income tax deduction for a tax period if a major illness is treated during that window.
However, the provisions are only available to taxpayers under the old tax regime. Any individual under the new tax regime introduced in 2020 is not eligible for this deduction.
Key Takeaways
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Residents and HUFs can get a deduction on their income tax for critical healthcare costs during a tax period.
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The limit is ₹40,000 for patients below 60 years and ₹1,00,000 for senior citizens.
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In case of a reimbursement from the insurance company or employer, the deduction happens from the overall expenses of the process.
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The deduction is available only under the old tax regime.
What Is Section 80DDB of the Income Tax Act?
Section 80DDB of the Income-tax Act, 1961, provides Indian taxpaying citizens with a tax deduction for medical expenses incurred for the treatment of certain critical diseases. However, the provision is only available to taxpayers who are still under the old regime. Those who have been paying taxes since 2020, under the new regime, are not eligible for its benefits.
Read More About: The Income Tax Act, 1961
Who Is Eligible to Claim Deductions?
Among old regime taxpayers, the deductions under Section 80DDB are offered to:
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Resident individuals bearing medical expenses for themselves or a dependent.
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Hindu Undivided Families with any member suffering from critical diseases listed in the section.
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Taxpayers whose medical expenses are covered by employers or insurance companies.
Note: The deductions are only available for diseases listed as eligible under the section.
Diseases Covered Under Section 80DDB
Section 80DDB allows a deduction for certain diseases listed under Rule 11DD, which are limited to the following conditions:
|
Disease Category |
Specified Ailments Covered |
|
Neurological Diseases certified with a disability level of 40% |
Dementia, Dystonia musculorum deformans, Motor neuron disease, Ataxia, Chorea, Hemiballismus, Aphasia, Parkinson's disease |
|
Malignant Cancers |
All certified forms of malignant cancers |
|
Immune System |
AIDS |
|
Renal Disease |
Chronic Kidney Failure |
|
Haematological Disorders |
Haemophilia and Thalassemia |
Deduction Limit Under Section 80DDB
Section 80DDB of the Income Tax Act provides a deduction based on the actual amount spent on critical healthcare for the listed diseases, during the applicable tax period.
|
Age of Patient |
Maximum Deduction |
|
Below 60 years |
₹40,000 |
|
60 years and above (Senior Citizen) |
₹1,00,000 |
Note: In case of any reimbursement from an insurance company or any employer, the paid amount has to be subtracted from the deductible amount.
Read More About: Section 80U Deduction
Documents Required to Claim Deduction Under Section 80DDB
Section 80DDB primarily requires a prescribed medical certificate from Medical Council-recognised specialists in fields relevant to the patient's condition. As per the disease category:
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A neurologist, for neuro-related diseases.
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An oncologist for malignant cancers.
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A specialist with a post-graduate degree in General or Internal medicine for full-blown AIDS.
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A nephrologist or urologist for chronic renal failure.
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A specialist in Haematology for haematological disorders.
The medical certificate itself should include details of the patient and the disease, along with relevant credentials of the doctor, including their registration number and the issue date of the certificate. Also, if the patient’s treatment happens at a government hospital, the prescription needs to state the name and address of the facility.
Read More About: What Is Section 80G?
How to Claim Deduction Under Section 80DDB
It is recommended to check eligibility before starting the process, as this deduction is available only under the old tax regime. After confirming your eligibility and coverage of patient’s condition under Rule 11DD, please follow the following procedures to file a successful ITR:
Step 1: Obtain the specialist’s prescription
Your specialist needs to include the patient's details, the diagnosis, and their own name, qualification, registration number, and signature. Missing any of these can cause problems later, so check the prescription carefully before filing it away.
Step 2: Calculate the eligible expense
Subtract any amount you received from your insurer or employer for reimbursement of the treatment. The difference is your net outlay. If the full amount is over the statutory limit the full amount cannot be claimed. The lower of the net expense or the limit is claimed.
Step 3: Report the deduction in your ITR
Claim the deduction on your income tax return
Report this figure in the deductions schedule under Chapter VI-A of Section 80DDB of the old tax regime.
Step 4: Retain the supporting records
You must keep the prescription, medical bills, proof of payments and reimbursement records. You will not be filing these along with your return, but the Income Tax Department may ask for them at the time of assessment or verification. Therefore, keep them safe and easily accessible.
Read More About: What Is Income Tax Return (ITR)?
How Is the Deduction Under Section 80DDB Calculated?
Calculation of deduction under Section 80DDB has three steps:
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Computation of Total Medical Expense (eligible conditions only)
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You deduct insurance or employer reimbursements.
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Using the statutory limit according to the patient's age
So your ITR would be calculated like this: If you are 45 years old, and have a net hospital bill of ₹1,00,000, and have a partial insurance cover of up to 40% of the medical bill, then the ITR would be as follows:
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Net expenses = ₹1,00,000 - ₹40,000 (insurance amount) = ₹60,000
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Applicable statutory limit below 60 years of age = ₹40,000
So, you are eligible to claim ₹40,000 under section 80DDB, provided that you are currently paying taxes under the old tax regime.
Difference Between Section 80DDB, Section 80DD and Section 80U [H2]
Taxpayers often get confused between section 80DDB and sections 80DD and 80U of the Income Tax Act. The three sections are all about medical or disability-related relief, but each has a different function:
|
Basis |
Section 80DDB |
Section 80DD |
Section 80U |
|
Purpose |
Deduction for treatment costs of specified diseases |
Deduction for maintenance or medical treatment of a dependent with disability |
Deduction for the taxpayer's own disability |
|
Who claims it |
Resident Individual or HUF, for self or dependant |
Individual or HUF, for a dependant with disability |
Individual with disability |
|
Nature of deduction |
Based on actual medical expenses subjected to limits specified in the section |
Fixed deduction irrespective of actual expense |
Flat deduction irrespective of actual expense |
|
Deduction limit |
₹40,000 /for individuals below 60 years and ₹1,00,000 for senior citizens above 60 |
₹75,000 for disability and ₹1,25,000 for serious disability |
₹75,000 (disability); ₹1,25,000 (severe disability) |
|
Certificate needed |
Medical Certificate by a Specialist under Rule 11DD |
Disability certificate |
Disability certificate |
How to Obtain the Certificate for the Disease for the Section 80DDB Deduction?
The prescribed medical certificate can be obtained from any hospital or treatment facility, provided the treating physician is qualified as specified in Rule 11DD of the Income Tax Act. If the certificate contains all the information required by the same rule, it shall be deemed valid.
Recent Amendments and Key Updates to Section 80DDB
The latest amendment in Section 80DDB is regarding the new tax regime, which has been effective from 2020. Under this regime, the taxpayer has to forego most of the deductions, including those under Section 80DDB. Section 115BAC replaces it with a lower tax slab. This is now a default option for new taxpayers. However, individuals under the old tax regime can still take the benefit of deductions.
Conclusion
Section 80DDB of the Income Tax Act provides major tax relief, more so in view of the high costs of critical healthcare. However, it’s important to check eligibility and follow the correct procedure. Ensure you have the right documentation and credentials with you when filing an ITR under this section so that the process is as simple and quick as possible.
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