Section 80DD Deductions
Section 80DD of the Income Tax Act, 1961, is the part of the Act which governs tax deductions for individuals claiming exemptions due to having a dependent that is differently-abled. All Indian residents and Hindu Undivided Families are eligible under this.
This section governs the support the government gives to those who have dependents who are disabled and entirely dependent on a family member.
Features of Section 80DD
The main features of Section 80DD of the Income Tax Act include the factors that govern who get support, what level of support they receive, and how to receive the support:
- Taxpayers are allowed rebate for support of a fully dependent disabled family member
- Eligibility criteria: Taxpayers are allowed rebates for those who are disabled as notified under the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995. Along with this, people who are counted under in clauses (a), (c), and (h) of section 2 of National Trust for the Welfare of Person with Cerebral Palsy, Autism, Multiple Disabilities, and Mental Retardation Act, 1999 will also be allowed.
- The person claiming tax rebate must have incurred expenditures under the headings of either medical treatment, rehabilitation, nursing, for the differently-abled individual. Alternatively, if the claimant has begun an insurance scheme or something similar for the support of the differently-abled person, this is also eligible for a rebate
- The rebate is not dependent on the actual expenses.
- The individual who is disabled will have to have a valid medical certificate that certifies that they have one of the eligible disabilities and are at least 40 per cent disabled.
- In the financial year, if the disabled individual passes away before the individual they are dependent on, the income tax deduction will not be applicable.
The rebate, which is allowed according to the Income Tax Act, depends on the amount of disability the disabled person faces and not the actual expenses incurred, as summarized below.
|Level of Disability||Previous Limit||Limit of Rebate (as of 2016)|
|40 per cent to 79 per cent disability||Rs. 50,000||Rs. 75,000|
|80 per cent and over disability||Rs. 50,000||Rs. 1,25,000|
Eligibility Criteria for Claiming Tax Rebate Under Section 80DD
As the tax deduction allowable is a significant amount, the eligibility criteria for claiming this rebate option is significant:
- Those Indians who are non-resident or NRI are unable to claim this deduction
- This deduction is not for the person who has a disability but anyone they are fully dependent on. This tax exemption option is not allowed if the differently-abled individual has already claimed a deduction under section 80U of the Income Tax Act for their benefit
- For someone to qualify as a dependent, they have to be either one of spouse, children, parents, or siblings of any the person claiming the tax deduction. Any member of a Hindu Undivided Family can be claimed as a dependent
- The level of disability of the dependent individual must be not less than 40 per cent, as attested by a medical certificate
- The disability must be one that is defined under section 2(i) of the Persons of Disabilities Act, 1995
- The differently-abled individual must be wholly or mostly dependent on the person claiming a tax deduction
For all Indians who meet these conditions, they can claim deductions on their tax payments.
Common disabilities that are covered by this section include cerebral palsy, autism, and others.
To calculate the amount of rebate that is owed, take the following example:
For a Mr De, whose sister has cerebral palsy and is unable to work, if he has had to hire a nurse for her and paid Rs 40,000, he may claim an income tax deduction.
If she is disabled above 40 per cent and less than 80 per cent, then he can claim Rs 75,000 deduction. If she is disabled over 80 per cent, he can claim Rs 1,25,000 as a deduction.
However, if her disability is less than 40 per cent, unfortunately, she will not be considered disabled enough to be covered under Section 80DD of the Income Tax Act.
How is the Rebate Calculated on Section 80DD?
The tax deduction calculation for Section 80DD is dependent only on a single factor, the degree of disability of the differently-abled dependent. Therefore, unlike many other sections of the Income Tax Act, the calculation of the tax deduction option for the supporter of a differently-abled person is fairly straightforward:
- For differently-abled people who are disabled over 40 per cent but not 80 per cent or more: Until 2016, the claim amount allowed was Rs 50,000. Afterwards, it became Rs 75,000
- For differently-abled people who are disabled over 80 per cent: Until 2016, the claim amount allowed was Rs 50,000. Afterwards, it became Rs 1,25,000
- The deduction will not reduce in case actual expenses are lower
This is applicable for the financial year in which expenses have been incurred towards the maintenance of the differently-abled person, including medical expenses, expenses towards insurance, or any maintenance scheme for the support of the differently-abled person.
Please note that there are certain special cases:
If the differently-abled dependent person passes away in a certain financial year, before the person receiving the deduction does, then the claim will not be allowed, even in cases where a premium amount has been paid.
How to Claim the Rebate under Section 80DD?
To claim the tax deduction option under section 80DD, documentation is required as follows:
- The claim should include an updated medical certificate certifying the disability of the individual, and that it is above 40 per cent. This should be issued by the central of state government’s medical board
- If the claim is due to an insurance policy, it is required to be a life insurance policy. Health insurance policies are not covered. The policy should be in the tax assessor’s name
- If the claim is for a scheme which would provide the differently-abled individual with an annuity or lump-sum payment in case of death of the person who is supporting them, this is also allowed
- Differently-abled individuals with multiple disabilities or single disability of autism or cerebral palsy would also require a separate form 10-1A to be input for them
- Differently-abled individuals with severe mental illnesses or some other disabilities might also need two other separate forms
If the disabled person passes away earlier than the person claiming the tax rebate, the policy amount would be returned. Therefore it would be treated as normal income and be taxable.
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Q: Expenses under what headings are allowable as income tax deductions under Section 80DD of the Income Tax Act?Ans: Expenses that can be claimed for tax exemption purposes for the option of section 80DD are particular. They include any expenses that the person claiming the exemption has made for the medical health of the differently-abled dependent such as nursing costs, healthcare treatment, or rehabilitative treatment. Along with this, expenses for life insurance policies or annuity or payment schemes for the support of the differently-abled persons may be claimed for tax exemption options.
Q: What sort of documentation is required to ensure that the individual can claim their disability status?Ans: Certain documents are mandatory to claim tax exemption option under Section 80DD of the Income Tax Act. For all differently-abled people, a medical certificate provided by central or state government medical boards attesting that their illness exists and is over 40 per cent disability is required. Along with this, the name of the person they are dependent on should be noted, who should be the person claiming the tax exemption. This certificate requires renewal from time to time.
Q: Do the receipts of the treatment need to be submitted to the Income Tax department to claim a deduction under Section 80DD?Ans: The original receipts of the medical treatment do not need to be preserved for claiming the tax exemption benefits. However, in case of a claim against payments made to life insurance policies, or any scheme for the maintenance of the differently-abled individual, the receipts or policy documents will be required, to prove the details.
Ans: No, taxpayers are entitled to the full amount of the rebate allowed. The only factor controlling the amount of rebate received by the taxpayer is the degree of disability of the differently-abled person dependent on them.
Ans: Several disabilities come under this section. These include disabilities under the Persons with Disabilities Act, 1995, as well as others. These include cognitive or severe mental disabilities; Cerebral palsy; hearing impairment; low vision, multiple disabilities; blindness; mental illness; Locomotors disability; Leprosy-cured, Autism.