Tax Deduction under Section 80DD

The Indian Government has taken steps in order to provide some sort of relief to these groups of people, especially those with disabilities or severe disabilities, under Section 80DD of the Income Tax Act

Claim Deduction under Section 80DD Eligibility:

The following are the requirements for claiming the deduction under section 80DD:

  1. An individual or member of a Hindu undivided family residing in India.
  2. The deduction does not apply to non-resident Indians (NRIs), since many countries give their residents largely free medical care.

Income tax deductions include:

According to section 80DD, the following expenses are exempt from income tax:

  1. Medical expenses incurred for the treatment of disabled dependents, including nursing, training, and rehabilitation.
  2. Amounts paid towards Life Insurance Corporation (LIC), Unit Trust of India, or any other insurer for the sole purpose of helping maintain a disabled dependent.

In terms of income tax laws, what is a disabled dependent?

Individuals who fall under the following circumstances may qualify as disabled dependents under section 80DD:

  • A disabled person can be considered your dependent if they are your spouse, son or daughter (or any child), parents, or siblings.
  • Any member of a Hindu undivided family can be a disabled dependent of the HUF.
  • Ideally, the disabled individual should be completely or mostly dependent on the taxed for their support and maintenance.
  • Also, he or she should not claim the deduction under section 80U.

What is considered a Disability or Severe Disability under Section 80DD?

Section DD defines disability under clause (i) of section 2 of the “Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995” as well as disabilities included in sections (a), (c) and (h) of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999.

Therefore, this includes the following disabilities:

  1. Disabilities of the cognitive or mental nature
  2. Vision impairment
  3. Insight into blindness
  4. Curable from leprosy
  5. Impairment of hearing
  6. Disability related to locomotives
  7. Having a mental illness
  8. The autism spectrum
  9. The condition of cerebral palsy
  10. Disabilities that are multiple

It is essential to note that person must not suffer less than 40% of any of the above disabilities. When it comes to sever disability 80% or above of one or more of the mentioned illnesses or disabilities is considered.

Section 80DD Tax Deduction for Disabled Dependents

It is important to understand that in the event that a disabled dependent dies before the taxed individual, the premium amount paid in that year will be taxed, because it is considered the survivor’s income for that year and is therefore taxable.

  • According to section 80ddb of income tax act, deductions are allowed for disabled dependants (40% and over disability). Since 2016, the limit has been raised to Rs. 75,000.
  • The income tax deduction available under section 80DD is Rs. 50,000 for severely disabled dependents (80% or more disability). This limit has been increased to Rs. 1,25,000 since 2016.
  • The tax assessment will be eligible for the full deduction regardless of the real expenses for a disabled dependent relative that are less than the amount mentioned above.

Tax deductions under 80DD are subject to the following conditions:

  • To claim the deduction, people must provide a hard copy of the medical certificate stating disability issued by a state or federal medical board.
  • It must be a life insurance policy and not a health insurance policy in the name of the tax assessor. You could also provide an annuity or a simple lump sum amount to your disabled dependent in the event of your untimely death.
  • When a disabled dependent dies before his or her taxed age, the policy amount is returned to them and is therefore treated as income and taxed accordingly.

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