Income Tax deductions U/s 80DD & 80U

Deduction u/s. 80DD for expenses on medical treatment of disabled dependent

CA Sandeep Kanoi

Deduction u/s. 80DD for expenses on maintenance/ medical treatment of disabled dependent

In Past few years cost of medical treatment has shoot up very sharply and has made medical treatment almost out of reach of Lower and Middle class families in India. Government of India has in order to provide some relief to those who have a dependent with disability or sever disability provided some relief’s from Income tax under section 80DD of the Income Tax Act, 1961.

Who is eligible to claim deduction?

· Individual or a Hindu undivided family, who is a resident in India.

· Deduction u/s 80DD is not available to non-resident Indian (NRI).

What Expenses are eligible for deduction?

· Expenditure for the medical treatment (including nursing), training and rehabilitation of a disabled dependent.

· Money paid to Life Insurance Corporation (LIC), Unit Trust of India or any other insurer for the purpose of buying specified scheme or insurance for the purpose of maintenance of such dependant.

Definition of relative: Who can be your disabled dependant?

· For individuals, your spouse, son / daughter (any child), parents and brother / sister (siblings) can be your handicapped dependants.

· For HUFs, any member of the HUF can be a disabled dependant.

· The disabled person should be wholly or mainly dependant on you for his / her support and maintenance, and should not have claimed deduction under section 80U.

Some considerations for the insurance premium

· Not all schemes qualify – there are specific schemes meant for this purpose. The policy has to insure your life. i.e. it should be in your name.

· Premium is required to be paid on annual basis or a lump sum amount for the benefit of the disabled dependant.

· Nomination of Policy should be in the name of (a) your disabled dependant, or (b) any other person or trust that would receive the money for the benefit of your disabled dependant

Policies in which one can invest

· Life Insurance Corporation of India offers two insurance policies – Jeevan Aadhar and Jeevan Vishwas for the benefits of parents or guardian of person with physical disabilities which qualify for tax benefit under Section 80DD.

These policies ensure that the dependant person with physical handicap does not have to depend on anybody for financial support in case something happens to his parent or guardian. The Jeevan Aadhar is a non- profit policy and is relatively cheaper whereas the Jeevan Vishwas is a policy which participates in profits.

Under both these insurance polices, the life of the person, on whom the handicapped person is dependant, is insured. In case the dependant dies before the guardian/parent, the parent/guardian will have the option to either keep the policy for a reduced paid-up sum assured or entitled to receive the refund of premiums paid.

However if the parent/guardian dies before the dependant, 20% of the lump sum assured becomes payable for the benefit of the dependant. Moreover the balance is paid by way of monthly annuity for 15 years for sure and thereafter for life on the life of dependant.

· The health insurance cover provided by National Trust needs special mention. The trust has introduced “Niramaya” health Insurance Scheme for persons with disabilities like Autism, Cerebral Palsy and Mental Retardation etc. Under this scheme, for those who have family income of less than Rs. 15,000 per month, you need to make a payment of Rs. 250 per year. For the person having family income of more than Rs. 15,000 per month is required to pay an amount of Rs.500 per year. For the families which are Below Poverty Line (BPL) this scheme is free, provided the applicant holds the BPL card. This scheme covers health expenses up to a limit of Rs. 100,000 per year for the person suffering from these disabilities. The scheme is administered by National Trust in collaboration with ICICI Lombard. Under this scheme even existing disease are covered without any medical check up. Moreover this plan covers routine expenses like medical check up, transportation and corrective surgery etc. which are not covered under regular health insuranceproducts.

What is considered as disability and Severe Disability?

Disability would be as defined under clause (i) of section 2 by the “Persons with Disabilities (EqualOpportunities, Protection of Rights and Full Participation) Act, 1995”.

It includes the following:

· Blindness

· Low vision

· Leprosy-cured

· Hearing impairment

· Locomotor disability

· Mental retardation

· Mental illness

· Autism

· Cerebral palsy

· Multiple disabilities

A person with disability means a person suffering from not less than 40% of any of the above disabilities.

Severe disability means 80% or more of one or more of the above disabilities.

Other Conditions to claim deduction

· For claiming the deduction in respect of the above, you have to furnish a medical certificate of disability from a Government Hospital certifying the disability of the dependant. The certificate needs to be renewed periodically.

· For people having Autism, Cerebral Palsy or multiple disabilities, form number 10-IA needs to be filled up. There are two other formats for person suffering from mental illnesses and all other disabilities.

· People have to furnish self declaration certifying the expenditure incurred on account of medical treatment (including nursing), training and rehabilitation of the handicapped dependant.

· You do not have to preserve the actual receipts for expenses incurred. However you will have to produce the actual receipts in case you claim deduction in respect of payment made to LIC, UTI etc for the purpose of buying insurance or other schemes for maintenance of such dependant.

Who can issue medical certificate of disability?

· Neurologist having a degree of Doctor of Medicine (MD) in Neurology (or, in case of children, a Pediatric Neurologist having an equivalent degree)

· A Civil Surgeon or Chief Medical Officer (CMO) of a government hospital

Taxability of Premium Amount Paid in Case disable dependant dies before the taxpayer:-In case your disabled dependant predeceases you (that is, dies before you); the amount in the policy is returned to you. This would be treated as your income for the year in which you receive it, and would be fully taxable in your hands.

Amount of Deduction and Tax Saving

o    The deduction allowed is Rs. 50,000 if disabled dependant is not suffering from severe disability.

o    Deduction allowed goes up to Rs. 1,00,000 if disabled dependant is a person with severe disability.

o     Deduction not depend on amount of expenses incurred:- Even if your actual expenses on above mentioned disabled dependent relative is less then amount mentioned above you will be eligible to full deduction.

o    The income tax that you can save would depend on the tax bracket that you fall into – it can range from Rs. 5,000 to Rs. 15,000 (for Rs. 50,000 deduction) or from Rs. 10,000 to Rs. 30,000 (for Rs. 1,00,000 deduction).

Please Note -

a) Individuals would need to produce a copy of the disability certificate as issued by the central or state government medical board to claim deduction.

b) Insurance policy obtained must be in your name and should be a policy for life. It could pay either an annuity or a lump sum amount for the benefit of the dependent on your death.

c) If the disabled dependent predeceases you, the policy amount is returned to you, and treated as income for the year in which you receive it, thus fully taxable in your hands.

Conclusion:- The physical and mental agony experienced by the parents/ guardian of such dependants cannot be taken away but Government of India, National Trust, LIC and other charitable institutions are doing commendable job by reducing the financial agony of such families. It is important for all of us to look for such benefits available and talk these about in various media to take it across as many people as possible. This is a bit of social work which can give relief to handicapped persons and their parents.

Frequently Asked Questions

Question – I am a salaried person who had a son with hearing impairment. My son underwent an operation for cochlear implantation and I spent around Rs 6 lakh for it. Can I get any tax benefit for the treatment expenses?

Answer:- Section 80DD allows a deduction to an individual or HUF if the person has incurred in the previous year any expenditure on medical treatment (including nursing), training and rehabilitation of a dependant with a disability or paid or deposited any amount under a scheme framed in this behalf by an insurer for the maintenance of a dependant with a disability.

A person with a disability is one suffering from not less than 40 per cent of a disability (as certified by a medical authority working in a hospital or institution notified by the Government), which could be blindness, low vision, leprosy – cured, hearing impairment, locomotor disability, mental retardation, mental illness.

Hearing impairment, for this purpose, means a loss of 60 decibels or more in the better ear in the conversational range of frequencies.

A person with disability also includes the one suffering from autism, cerebral palsy, mental retardation or a combination of any two or more. Section 80DD allows a deduction of up to Rs 50,000 a year and if the disability is severe, up to Rs 1,00,000 a year. Severe disability means a person with 80 per cent or more of the disability. You can claim deduction if your fits into these categories.

Question:- My father is a pensioner and his pension is less than my salary. My sister is a disabled dependant with 85% disability. She is dependant on me. Can I get rebate under section 80DD? My Assessing Officer says that your father is alive and is getting pension; so you cannot claim deduction. Is it true?

Answer:- Your Assessing Officer is not correct. The deduction u/s 80DD is for dependant of an individual tax payer and dependant includes brother and sister of Individual. You can furnish to Your Assessing officer an undertaking from your father that your sister is dependant on you and not on your father.

Question:- I have a handicapped dependant who is my cousin ( Daughter of my mother’s sister). She is completely dependant on me and every month I spend Rs 10,000. She is suffering from 85 % Blindness and mental problem. I wanted to know whether I can claim tax benefit under 80DD?

Answer U/s. 80DD dependant means in the case of an individual, the spouse, children, parents, brothers and sisters of the individual or any of them;

It is clear that section 80DD is applicable only if the person on whom you are spending are any one of following

o     your wife or husband

o     your children

o     your parents

o     your brother

o     your sister

o     your wife’s or husband’s brother or sister

o     your parents’ brother or sister

The Daughter of your mother’s sister is, clearly, not coming under the definition of dependant for the purpose of claim of deduction u/s 80DD. So, you can not claim deduction u/s. 80DD in respect of expenses incurred for her maintenance and medical treatment.

Deduction U/s. 80U for disabled persons

Sandeep Kanoi

Deduction Under Section 80U ofIncome Tax Act, 1961 for disabled persons 

The Income Tax Act, 1961 provides deduction u/s. 80 in pursuance of which an individual (Indian citizen and foreign national) who is resident of India, and who suffers from not less than 40 per cent of any disability is eligible for deduction to the extent of Rs. 50,000/- and in case of severe disability to the extent of Rs. 100,000/-.

For availing deduction u/s. 80U, the assessee needs to fulfill certain legal formalities like he has to obtain a certificate from medical authority constituted by either the Central or the State Government, along with the Return of Income for the year for which the deduction is claimed. The intricate details of Section 80U is explained below in question answer form.

Q.      What is the main difference between Deduction u/s. 80U & Section 80DD?

80DD deduction is in case of the dependent of the employee whereas 80U deduction is in case of the employee himself.

Q.  Do deduction amount U/s. 80U dependent on amount of Expenditure?

This deduction amount is a lump-sum one, irrespective of how much you spend on medical treatment.

Deduction could be claimed even for the year in which the certificate expires. Beyond this year, no deduction could be obtained till the certificate is renewed or a new one is obtained.

Q.      Deduction u/s. 80U is allowed to whom?

Ans.   Deduction u/s. 80U is allowed to any person being a resident (Indian citizen or foreign national), who, at any time during the previous year, is certified by the medical authority to be a person with disability or severe disability.

Q.      What Documents are required to claim deduction Under Section 80U?

To avail a deduction under Section 80U, no bills or receipts are required. What is required is a validcertificate from a medical authority certifying the disability. Separate forms need to be filled for mental illnesses and all other disabilities. For illnesses such as autism or cerebral palsy formnumber 10-IA additionally needs to be filled.

Q. Which are the medical Authorities who can certify Under Section 80U?

The medical authorities who are deemed to certify are:         

-A Neurologist with an MD in Neurology.

-For children, a Paediatric Neurologist having an equivalent degree.

-A Civil Surgeon or Chief Medical Officer (CMO) of a government hospital.

Q.      What is by “Disability”?

Ans.   “Person with disability” means a person suffering from not less than forty per cent of any disability as certified by a medical authority;

The disabilities are those which are specified in “The Persons with Disability (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995”.

“Disability” means-

(I) Blindness refers to a condition where a person suffers from any of the following conditions, namely:-

(i) Total absence of sight. or

(ii) Visual acuity not exceeding 6160 or 201200 (snellen) in the better eye with correcting lenses; or

(iii) Limitation of the field of vision subtending an angle of 20 degree or worse;

(II)  Low vision – “Person with low vision” means a person with impairment of visual functioning even after treatment or standard refractive correction but who uses or is potentially capable of using vision for the planning or execution of a task with appropriate assistive device;

(III) Leprosy-cured- “Leprosy cured person” means any person who has been cured of leprosy but is suffering from-

(i) Loss of sensation in hands or feet as well as loss of sensation and paresis in the eye and eye-lid but with no manifest deformity;

(ii) Manifest deformity and paresis; but having sufficient mobility in their hands and feet to enable them to engage in normal economic activity;

(iii) Extreme physical deformity as well as advanced age which prevents him from undertaking any gainful occupation, and the expression “leprosy cured” shall be construed accordingly;

(IV) Hearing impairment- Hearing impairment” means loss of sixty decibels or more in the better ear in the conversational range of’ frequencies;

(V) Loco motor disability- “Loco motor disability” means disability of the bones, joints muscles leading to substantial restriction of the movement of the limbs or any form of cerebral palsy,

(VI) Mental retardation- “Mental retardation” means a condition of arrested or incomplete development of mind of a person which is specially characterized by sub normality of intelligence;

(VII) Mental illness- “Mental illness” means any mental disorder other than mental retardation;

Q.      What is by “Severe Disability”?

Ans.   Severe Disability is described as a person with eighty per cent or more of one or more aforementioned disabilities.

The benefit of deduction under this section has also been extended to persons suffering from autism, cerebral palsy and multiple disabilities.

Q.      What is meant by “medical authority”?

Ans.   Medical Authority means any hospital or institution specified in Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 by notification by the appropriate Government;

Q.      What is meant by “appropriate government”?

Ans.   “Appropriate Government” means,

i.  the Central Government in relation to the Central Government or any establishment wholly or substantially financed by that Government, or a Cantonment Board constituted under the Cantonment Act, 1924, the Central Government;

ii.  the State Government in relation to a State Government or any establishment wholly or substantially financed by that Government, or any local authority, other than a Cantonment Board,;

iii.   the Central Government in respect of the Central Coordination Committee and the Central Executive Committee,;

iv.   the State Government in respect of the State Coordination Committee and the StateExecutive Committee,;

Q.      What is the amount of deduction available under section 80U?

Ans.   For normal disability, assessee can claim deduction of Rs. 50,000 while assessee withSevere Disability can claim deduction of Rs.100,000/-.

Q.      What is the procedure Involved to claim deduction under this section?

Ans.    The assessee claiming a deduction under this section shall furnish a copy of the certificateissued by the medical authority in the form and manner, as may be prescribed, along with the return of income under section 139, in respect of the assessment year for which the deduction is claimed.

Where the condition of disability requires reassessment, a fresh certificate from the medical authority shall have to be obtained after the expiry of the period mentioned on the original certificatein order to continue to claim the deduction.