In this section of tax planning, we have discussed deductions under section 80C, 80CCC and 80D. The Government of India allows certain income tax benefits to individuals suffering from disability or to their family members. These fall under Section 80 DD and Section 80 U of the Income Tax Act. In this column, we discuss how to claim these benefits.
Handicapped Persons: Sec. 80DD and Sec. 80U
A resident individual having a dependant relative suffering from a permanent physical disability, including blindness or mental retardation, is entitled to a deduction for medical treatment, including nursing, training or rehabilitation of the dependant. The deduction available is Rs 75,000 for non-severe and Rs 1,25,000 for severe disability. ‘Relative’ includes the spouse, child, parent, brother and sister who is wholly or mainly dependant on the assessee and has not claimed any deduction u/s 80U. The same benefit is available to an HUF for its dependant member. This deduction is statutory in nature and is allowed in full, irrespective of the actual medical expenditure incurred.
Persons with Disability Equal Opportunities, Protection of Rights and Full Participation Act, 1996 defines a person with disability as a person suffering from not less than 40 per cent of any disability as certified by a medical authority and disability of 80 per cent or more is severe disability. Persons with Autism, cerebral palsy, mental retardation and multiple disabilities as per National Trust for Welfare of Persons are also covered by this section. Payments to UTI’s ‘Special Plan for the Handicapped’ and LIC’s ‘Jeevan Aadhaar’, specially designed for such persons are also covered within the stipulated ceiling. These schemes provide for a nomination of either the dependant, or any other person or a trust to receive the annuity or a lump sum for the benefit of the dependant if the subscriber expires. However, if the handicapped dependant predeceases the depositor, the deposits, without interest, will be paid to the assessee and it will be fully charged to tax as income of that year. The same benefit is available u/s 80U to a resident, who himself suffers from a disability. The assessee shall obtain a copy of the certificate of the medical authority before filing his return of income. Where the disability is temporary and requires reassessment after a specified period, the certificate shall be valid up to the FY during which it expires.
Terminal Diseases: Sec. 80DDB
A resident assessee shall be allowed a deduction up to Rs 40,000, Rs 60,000 for a senior citizen and Rs 80,000 for a very senior citizen if he has, during the previous year, actually incurred an expenditure for the medical treatment of specified diseases or ailments for himself or a dependant relative in case of an individual or for any member of an HUF. This deduction has been thankfully raised to Rs 100,000 for all senior citizens by the recent FA18. Vide Notification SO No. 2791(E) dated 12.10.15, Rule 11DD has been amended to do away with the requirement of furnishing a certificate in Form 10-I. A prescription from a specialist as specified in the rules is sufficient. Now, a funny aspect — ‘The deduction shall be reduced by the amount received, if any, under an insurance from an insurer or reimbursed by an employer for the medical treatment.’ This dilutes the very purpose of insurance. Unfortunately unlike Sec. 80DD, in the case of Sec. 80DDB the deduction is not statutory in nature. Therefore, an account of the expenses incurred will have to be maintained. Should the Act have such minor differences for same type of situations is a question of debate. A certificate from some specified specialists is required to be submitted. To avoid the hardships, SO 2791(E) dt. 12.10.15 enables the assessee claim the deduction on the basis of the prescription from a doctor specialised in the related disease. Strangely, u/s 80DD this concession is not available.
The authors, A.N. and Sandeep Shanbhag, are leading financial advisors. Write to them at email@example.com