Section 80DD of the Income Tax Act, 1961 - A Complete Guide

In today's era, medical expenses are at a peak, and dealing with such high medical costs is tough, especially when you have a family member with a disability. But in such a situation, Section 80DD of the Income Tax Act, 1961 is there to make things a bit easy for you. Yes, you read that right!  Section 80DD offers deductions for those taking care of individuals classified as disabled. 

So, if you want to learn more about this tax benefit, we are here to help you. In this blog, we will break down what Section 80DD means, what are its deduction limits and how it can be a helpful support for families dealing with extra medical costs. 

Overview of Section 80DD of the Income Tax Act

Section 80DD in the Income Tax Act of 1961 is like a helping hand for those taking care of family members with disabilities. This section of the ITA offers a fixed tax deduction to the caretaker, no matter how much they earn. The purpose behind this is to ease the financial burden that comes with looking after a disabled family member. This section allows deductions for expenses on medical treatments and amounts deposited in a scheme.

In short, Section 80DD aims to ease the financial burden on families caring for disabled dependents.

Definitions Under Section 80DD

Section 80DD holds significant importance for those seeking financial assistance in caring for their disabled family members. For a better understanding, it's essential to know the meanings of specific terms outlined in Section 80DD of the Income Tax Act of 1961.

• Disabled Dependent: A disabled dependent, as per Section 80DD, involves family members like spouses, children, siblings, and parents. This provision applies to both individuals and Hindu Undivided Families (HUFs). What's crucial is that disabled individuals must rely considerably or entirely on the taxpayer for their necessities and overall well-being.

NOTE: If you've already claimed deductions under Section 80U, you're not eligible for benefits under Section 80DD.

• Disability: Disability includes conditions such as cerebral palsy, autism, blindness, hearing impairments, and more. To avail of the benefits, a certified medical professional must provide the tax authority with a credible certificate indicating a 40% or more impairment in the health of the concerned disabled dependent.

Eligibility Criteria for Deduction Under Section 80DD

To be eligible for benefits under Section 80DD, certain conditions must be met:

• The deductions under Section 80DD apply to the disabled person only and not the person making the claim. If the disabled person has already claimed their tax benefits, the taxpayer cannot seek deductions under Section 80DD.

• As per the definition above, a 'dependent' under Section 80DD includes a spouse, children, parents, or siblings. It may also cover individuals under the care and protection of the Hindu Undivided Family (HUF).

• Expenses claimed for deductions must be of a medical nature, such as treatments, nursing, or rehabilitation for the dependent.

• The disability of the dependent must be more than 40% for the person to qualify for deductions under Section 80DD.

• These deductions are granted in addition to your actual expenditure, providing extra financial relief.

• Only individuals residing in India are eligible to claim the deduction.

Disabilities Covered Under Section 80DD

The disabilities covered under Section 80DD are as follows:

• Autism: Also known as Autism Spectrum Disorder (ASD), Autism is a complex condition marked by challenges in social interaction, language development, and repetitive behaviors.

• Blindness: Encompasses conditions like total absence of sight, visual acuity up to 6/60 or 20/200 (Snellen), or limited field of vision (20 degrees or worse).

• Cerebral Palsy: Involves non-developmental conditions resulting in abnormal motor control posture due to brain insult or injuries during prenatal, perinatal, or infant development phases.

• Hearing Impairment: Indicates a loss of sixty decibels or more in either ear within the conversational range, hindering normal conversation.

• Leprosy-Cured: Refers to individuals cured of leprosy but with residual physical challenges like loss of sensation in hands or feet, eye and eyelid issues, or extreme physical deformity.

• Loco-motor Disability: It involves disabilities in bones, joints, or muscles leading to a significant restriction of limb movement.

• Mental Illness: Includes a broad spectrum of mental disorders but excludes mental retardation.

• Mental Retardation: A condition with blocked or incomplete mental development, characterised by sub-normal intelligence.

Deduction Limit Under Section 80D

While deduction limits under various sections are based on factors like age, gender, and income, Section 80DD offers a fixed deduction to eligible individuals, irrespective of age or income group. 

Here's a breakdown of the deduction limit under this section:

For 40% Disability

If a certified statement from a medical practitioner confirms a disability of 40% or more on the medical scale, caretakers are eligible for a tax deduction of up to Rs. 75,000. This benefit applies irrespective of the caretaker's age or income.

For 80% Disability

In cases where the disability certificate indicates a disability of 80% or more (classified as severe disability), the person responsible for covering the expenses of the disabled dependent can seek a tax exemption of up to Rs. 1,25,000. This deduction also remains applicable regardless of the caretaker's age or income level.

How to Claim Deductions under Section 80DD?

To claim deductions under Section 80DD of the Income Tax Act of 1961, the process starts prior to filing your ITR electronically. 

Here's a list of steps:

Step 1: Determine if the dependent meets the criteria for a disorder, disability, impairment, or impediment as outlined under Section 80DD.

Step 2: Obtain a medical certificate indicating the extent of the dependent's disability. Make sure you acquire this certificate from a government hospital or a certified medical practitioner.

Step 3: Fill the Form 10A accurately as the form will capture the necessary details. Later, submit the same along with a Self Declaration and the Medical Certificate of your dependent during the ITR filing process.

Step 4: If you've filed your ITR online, visit the Income Tax Office and submit a copy of your e-acknowledgement along with a cover letter detailing your claim.

This way, you will be financially relieved for expenses related to the care of your disabled dependents.

Documents Needed for Claiming Tax Deduction Under Section 80DD

To avail of tax benefits under Section 80DD of the Income Tax Act, 1961, you will be required  to submit the following documents:

• Form 10-IA: If the disabled dependent has autism, cerebral palsy, or multiple disabilities, it's crucial to submit Form No. 10-IA along with the other required documents.

• Medical Certificate: To qualify for tax deduction under Section 80DD, you have to submit a copy of the medical certificate as evidence of your dependent's disability.

• Self-Declaration Certificate: Taxpayers are required to provide a self-declaration certificate detailing the expenses incurred on the medical treatment, covering nursing, rehabilitation, and training for the disabled dependent.

• Insurance Premium Receipts: While a self-declaration certificate generally suffices for most expenses, maintaining actual insurance premium receipts becomes important. Make sure you keep these receipts as proof of the incurred expenses.

Which Expenses Can be Claimed as Deductions Under Section 80DD?

Section 80DD covers a wide range of expenses related to the well-being of a disabled dependent. These expenses include costs associated with medical treatment, which further involves not only direct medical procedures but also nursing, specialised training, and rehabilitation efforts aimed at enhancing the quality of life for the disabled dependent.

In addition to this, if you have also invested in specific insurance plans designed to provide financial protection for your disabled dependent, the premiums paid for such insurance policies are also considered eligible for deductions under Section 80DD.

Terms and Conditions to Keep in Mind

When deciding the deposit amount or sum insured, it's important to consider the following:

• If the caretaker passes away, the disabled dependent has the right to be the main nominee for the sum insured or deposit amount.

• The insurance plan should allow the option of transferring the responsibility of the insurance to the next-in-line caretaker in case the main caretaker passes away.

Key Differences Between Section 80DD and Section 80DDB

The difference between Section 80DD and Section 80DDB is included in the form of a table below:

Conclusion

Section 80DD of the Income Tax Act is like a helpful friend for families looking after loved ones with disabilities. This section is not just a tax provision but also a lifeline that eases the financial burden on caretakers who take care of their disabled dependents. By giving deductions for medical expenses and insurance premiums, it acts as a real support system for those taking care of someone special. 

Frequently Asked Questions (FAQs)

Q 1. Who can claim deductions under Section 80DD?

Ans. Deductions under Section 80DD can be claimed by families caring for disabled dependents. It's important to note that the caretaker is eligible for the deductions and not the dependent. 

Q 2. What disabilities are covered under Section 80DD?

Ans. Section 80DD covers disabilities such as autism, mental retardation, low vision, hearing impairment, and more. 

Q 3. How much can one claim as a deduction under Section 80DD?

Ans. The deduction limit depends on the percentage of disability:

• For 40% disability: Up to Rs. 75,000.
• For 80% or above disability: Up to Rs. 1,25,000.

Q 4. Can individuals residing outside India claim deductions under Section 80DD?

Ans. No, deductions under Section 80DD are applicable only to individuals residing in India.