Who can claim a deduction under section 80DD?

Deduction under Section 80DD of the income tax act is allowed to Resident Individuals or HUFs for a dependent-who is differently-abled and is wholly dependent on the individual (or HUF) for support & maintenance.

Conditions to avail of Section 80DD deduction

Below are the conditions you must meet to avail this deduction –

• The deduction can be claimed only if the taxpayer opts to pay tax under the old tax regime.
• Deduction is allowed for a dependant of the taxpayer and not the taxpayer himself.
• The deduction can only be claimed by resident individuals of India.
• The taxpayer is not allowed this deduction if the dependant has claimed a deduction under section 80U for himself/herself.
• Dependant in case of an individual taxpayer means spouse, children, parents, brothers & sisters of the taxpayer. In case of a HUF means a member of the HUF.
• The taxpayer has incurred expenses for medical treatment (including nursing), training & rehabilitation of the differently-abled dependant or the taxpayer may have deposited in a scheme of LIC or another insurer for maintenance of the dependant.
• The disability of the dependant must not be less than 40%.
• Disability is defined under section 2(i) of the Persons of Disabilities Act, 1995.
• Disability certificate needs to be furnished in Form 10-IA issued by the prescribed medical authority along with the Income Tax return.

What is the maximum amount of deduction allowed under Section 80DD?

Fixed amount of deductions are allowed under Section 80DD, irrespective of the actual expenditure. However, the amount of deduction depends on the severity of the disability.

• Where the disability is more than 40% and less than 80%: Rs 75,000.
• Where the disability is 80% or more: Rs 1,25,000.

Note: Before the Financial Year (FY) 2015-16 (FY 2014-15 & earlier years) – The deduction limit was Rs 50,000 where disability was at least 40% and Rs 1,00,000 where there was more than 80% disability.

Necessary Documents to Claim Tax Deduction Under Section 80DD

The following documents will be required to be submitted to claim tax benefits under Section 80DD of the Income Tax Act, 1961:

• Medical Certificate: In order to avail of tax deduction under Section 80DD, the taxpayer is required to provide a copy of the medical certificate as evidence of the dependent's disability.
• Form 10-IA: If the dependent with a disability is affected by autism, cerebral palsy, or multiple disabilities, it is necessary to submit Form No. 10-IA.
• Self-Declaration Certificate: Taxpayers must provide a self-declaration certificate stating the expenses incurred on the medical treatment, which includes nursing, rehabilitation, and training, of the disabled dependent.
• Receipts of Insurance Premium Paid: While a self-declaration certificate is generally sufficient for claiming most expenses, it is not necessary to keep the actual receipts. However, if the individual claims expenses for insurance policies taken for the disabled dependent, it is important to maintain the actual receipts as proof of the expenses.

Difference Between Section 80U and Section 80DD

Section 80U permits an individual certified as a person with a disability to claim the deduction for themselves. Whereas Section 80DD allows for tax deductions if you incur medical expenses for a disabled dependent.

It is important to understand that deduction under Section 80DD cannot be claimed if the dependent has already claimed a deduction under Section 80U for themselves. 

Disabilities covered under Section 80DD

The following disabilities are covered u/s 80DD of the IT Act, 1961:

• Mental illness
• Hearing impairment
• Mental retardation
• Cerebral palsy
• Leprosy-cured
• Autism
• Loco motor disability
• Blindness
• Low vision

Who is responsible for issuing the medical certificate for a dependent with a disability? 

Below mentioned medical authorities can certify a person as disabled:

• A government hospital’s Civil Surgeon or Chief Medical Officer (CMO).
• A Neurologist with a Doctor of Medicine (MD) degree in Neurology. In case of a child, a Paediatric Neurologist holding an equivalent degree.

Things to Remember :

If a dependent passes away and you receive any funds from an insurance policy, those proceeds are subject to income tax based on the relevant tax brackets.

The deduction provided under Section 80DD is applicable in addition to any other tax deductions claimed under different sections of the Act. However, Section 80U & Section 80DD cannot be claimed together in respect of a same disabled person.