Section 80DD is an excellent tax benefit for Indian residents who manage the expenses of their disabled dependents. In addition, this tax benefit ensures that disabled people receive appropriate treatment and can lead a dignified life with family support and care.
How does Section 80DD work?
A resident individual or HUF (Hindu Undivided Family) can claim a deduction in taxes under Section 80DDb Income Tax Act, 1961, for medical treatment and expenses related to support and maintenance of a wholly dependent individual who is differently-abled or disabled.
Under Section 80DD, premiums for insurance plans designed specifically for disabled dependents are also deductible.
In order to qualify for Section 80DD deductions, the following criteria have to be met to qualify for Section 80DD deductions:
A deduction under Section 80DD applies only to a disabled or differently-abled dependent, not to the taxpayer.
Tax deductions under Section 80DD cannot be claimed if the dependent has already claimed a deduction under Section 80U for self.
Family members such as spouses, parents, children, sisters, and brothers can qualify as dependents of an individual taxpayer. Any member of the HUF is considered a dependent in HUF.
Tax deductions include expenses incurred by the taxpayer to treat, nurse, train and rehabilitate the disabled or differently abled dependent, or the premium paid towards the insurance policy from LIC or another registered insurer specifically designed for the disabled or differently abled dependent.
Deductions under Section 80DD of the Income Tax Act, 1961 are available if the dependent has a disability of 40% or more.
According to Section 2(i) of the Persons with Disabilities Act, 1995, the disability must be as defined in the act.
The eligibility for a deduction under Section 80DD
In order to claim a deduction under Section 80DD, an individual or HUF must be a resident of India.
Tax deductions under Section 80DD are not available to non-resident individuals (NRIs).
Section 80DD includes disabilities
The definition of disability under Section 2(i) of the Persons with Disabilities Act, 1995
Section 80DD of the Income Tax Act includes disability as defined in Section 2(a)(c)(h) of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999. The following are some of them:
- Insight into blindness
- Vision impairment
- Mental disabilities that are severe or cognitive
- Impairment of hearing
- Cure of leprosy
- Incapacity to move
- Palsy is a form of cerebral palsy
- The autism spectrum
- Illness of the mind
- The presence of multiple disabilities
In order to qualify under Section 80DD, the person must have a disability of 40% or more. A disability of 80% or more is considered severe.
Section 80DD definition of a disabled dependent
As per Section 80DD, the disabled individual must meet the following conditions in order for their caretaker to be considered a disabled dependent:
As a disabled dependent, you are considered to be your self, your spouse, your parents, your children, your siblings, and your brothers.
As far as HUF is concerned, any member of the HUF can be considered a disabled dependent.
For medical expenses, support and maintenance, the disabled dependent should be mostly or entirely dependent on the taxpayer.
Section 80U of the Income Tax Act prohibits the disabled dependent from claiming deductions for themselves.
Who provides the medical certificate certifying the disability?
Medical certificates from the following authorities qualify for deductions under Section 80DD of the income tax laws:
A chief medical officer or a civil surgeon in a government hospital
Neurologists with a Doctor of Medicine (MD) degree in Neurology or Pediatric Neurologists with a Doctor of Medicine (MD) degree in Neurology
Section 80DD tax deduction
Tax deductions under Section 80DD are determined by the severity of the disability of the dependent. For the Financial Year 2015-16 onwards, the following tax deduction amount can be claimed:
Dependent with 40% disability or more: If a differently-abled dependent has a disability of 40% or more on any one of the included disabilities, the taxpayer, who is part of the family of the disabled dependent and pays for their medical expenses, support, and maintenance, can claim a tax benefit up to $75,000.
Dependant with 80% disability or more: A differently-abled dependent with a severe disability, i.e. the disability is 80% or more, can take advantage of a tax benefit of up to 1,25,000 in a financial year if the taxpayer is a family member who pays for the disabled dependent’s medical expenses, support, and maintenance.
Section 80DD tax deduction documents required
Taxpayers are required to submit the following documents to claim deductions under Section 80DD of the Income Tax Act, 1961:
Medical certificate: The taxpayer must provide a copy of the medical certificate issued by the competent authority, as mentioned in 80DD, that authenticates the nature and severity of the dependent’s disability.
In the case of a disabled dependent who has multiple disabilities, cerebral palsy, or autism, the taxpayer must furnish Form 10-IA.
The taxpayer must provide a self-declaration certificate specifying the expenses incurred on medical treatment, nursing training, and rehabilitation of the disabled dependent.
Most expenses, including insurance premiums, can be claimed on the self-declaration form. To claim deductions on expenses, the taxpayer does not need to provide receipts. To qualify for Section 80DD tax benefits, a taxpayer must provide actual payment receipts for insurance premiums paid directly to the insurance company for the disabled dependent.