Dependent

Reviewed by Annapoorna | Updated on Aug 27, 2020

Introduction

The word 'dependent' holds relevance under direct taxation mostly, under income tax. The term has inference in Chapter VI A of the Income Tax Act,1961. Accordingly, an income tax assessee can claim some deductions if he incurs expenditure in the name of his dependant.

There are various provisions governing tax benefits to assessees for expenditure on dependents. These further specify who can qualify as dependants.

What is Dependent?

A dependent refers to a person being an individual who depends upon the tax assessee for survival and living; and must be a relative. For example, minors are dependents on their parents or legal guardians.

A spouse who is financially supported by their partner is termed as a dependent. The word 'relative' has been defined under the Income Tax Act, as an individual who is the husband, wife, brother or sister or any lineal ascendant or descendant of that individual.

Dependent' means :

  • The spouse, children, parents, brothers, and sisters of the individual or any of them, in the case of an individual, and

  • Member, in the case of an undivided Hindu family.

There are some conditions to be satisfied. The individual referred in the above definition must be wholly or mainly dependent on such individual or Hindu undivided family for support and maintenance. For the assessee to claim deduction under Section 80DD, he should not have claimed any deduction under Section 80U while computing the total income for the assessment year relating to the previous year.

Who is eligible to pay?

The commonly used deduction, Section 80D, provides for deduction on health insurance premium incurred on himself or his family. Here,""family"" means the spouse and the dependent children of the assessee. The upper limit for the deduction is Rs 25,000. The deduction under this provision can be claimed for parents whether or not they are dependant on such assessee. Hence, knowing whether the law provides a condition of dependancy holds importance. Any incorrect claims of deduction can subject the assessee to the income tax notice along with the penalties.

There are other sections such as Section 80DD and 80DDB that has clearly defined 'dependent'. Dependent-related tax benefits reduce taxes in several ways. Exemptions reduce the tax burdens by lowering the taxable income. Deductions contribute to a major portion of tax reduction because they directly cut taxes owed. Only one income tax assessee may claim benefits on a given dependent in their income tax return.