Section 80DD – Tax deductions for disabled persons

The government of India always comes up with something or other to improve the living of their people. Many times, we hear that people with disability suffer more. This is because people are either unable to take their proper care due to monetary issues or, sometimes, they just face challenges due to many other reasons.

In this budget, the government has added a provision in the hope of assisting people on whom disabled people are dependent. So now we will see the new provision in detail, but before that, we will recapitulate the provision of the sections before the new provision was added to get a better understanding.

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Section 80 DD

Section 80DD of the income tax act is allowed for Resident Individuals or HUFs for a person who is differently-abled and is wholly dependent on the individual or HUF. These deductions are applicable on expenses related to caring for a disabled dependent. The amount will also cover insurance premiums paid to specific insurers for the maintenance of a disabled dependent.

Now, since we have got the idea for whom 80 DD is applicable, the question might pop are there any conditions applicable for availing this section. If yes, then what are those?

Terms and Conditions

Here are the conditions required to be met for availing the deduction –

• Under this section, deduction is allowed for a dependence of the taxpayer and not for the taxpayer himself.
• The taxpayer is not allowed this deduction if the dependent has claimed a deduction under section 80 U for himself or herself.
• The meaning of dependents in the case of an individual taxpayer are the spouse, children, parents, brothers & sisters of the taxpayer. In the case of a HUF means a member of the HUF.
• It will be allowed when the taxpayer has incurred expenses for medical treatment (including nursing), training & rehabilitation of the differently-abled dependent, or the taxpayer may have deposited in a scheme of LIC or another insurer for maintenance of the dependent.
• The disability of the dependent is not less than 40%.
• Disability is defined under section 2(i) of the Persons of Disabilities Act, 1995.

Note- If a disabled person has already claimed deductions on an amount through Section 80 U, the same amount cannot be claimed again as deductions under Section-80DD.

Now, after seeing the terms and conditions, we might be curious to know what the limit of the deduction is. Is it the same for all levels of disability?

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Amount of Deduction

When the above conditions are met, the amount of deduction allowed is –

• Rs 75,000- where disability is more than 40% and less than 80%.
• Rs 1,25,000 – where disability is more than 80%.
• These deductions are allowed irrespective of your actual expenditure.

New Changes

Budget 2022 has introduced a new tax benefit as a deduction for the parent or guardian of a disabled person. As per the new provision, if the parent/guardian of a disabled person buys a savings life insurance policy with the latter as beneficiary, then they would be eligible for deduction from gross income before tax subject to certain conditions. This tax benefit can be claimed even in cases where the policy benefits and payouts start while the buyer of the policy is still alive. In other words,

• Deduction of Annuity paid by the subscriber assessee can be claimed ever after attaining age of 60 years.
• Amount received by the dependent disabled upon death of subscriber even after 60 years will be exempt

Case Study

BabaTax is a guardian of a severely disabled person on whom they have spent Rs 89,000 for medical treatment and rehabilitation of the person.

In this case, Babatax can claim the full amount of Rs. 1.25 lakhs for severely disabled dependents, irrespective of the amount spent throughout the year on care. In the case of disabled dependents, Rs. 75,000 can be claimed as a deduction. All they need to do is produce a certificate of disability from specified medical authorities to claim the deductions. In the case of a dependent who is suffering from cerebral palsy, autism, or multiple disabilities, then form 10-IA has to be submitted. This form has to be signed by a neurologist, pediatric neurologist (for children), or a civil surgeon or chief medical officer.

80DD Benefits

Let us conclude by summarizing the benefits of deductions under this section.

In a nutshell, it can be claimed by individuals and HUFs in full irrespective of the amount of expense incurred while caring for the dependent or in the form of insurance premium. They are not required to present the documents related to the expenses, but the point to be taken care of here is that they will be required to submit a medical certificate authenticating the disability of your dependent from a certified medical professional as defined by the government.