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February 21, 2016

Section 80DD, Section 80DDB, Section 80U

Tax deduction for disabled persons
Section 80DD, Section 80DDB & Section 80U are provisions in Income Tax Act which allows for income tax exemption for maintenance and benefit of disabled person.

Deduction can be claimed by
Family member
Permanent physical disability or other specified diseases which can reduce such an individual's capacity for normal work
Differently abled person himself or Family member
Treatment of specified diseases
Differently abled person himself
Same as 80DD
Important thing to note here is that if an individual claims deduction u/s 80U, his relative/ family member cannot claim deduction under Section 80DD. However 80DDB is independent from 80DD and 80U.

 For getting the deduction under any of aforesaid sections, you have to satisfy following conditions:
·         You have to be a resident of India (deduction is not available to non-resident)
·         You are an individual or a Hindu undivided family (HUF)
·          Certificate in Form 10I (you can download the format here).  You don’t need to submit the medical certificate with income tax return at the time of claiming deduction But You will have to produce it to the Assessing Officer (AO) as and when required, at the time of assessment.

Section 80DD
·         You have made expenditure under any/ both of the two options: 
Option 1
Option 2
You have incurred expenditure for medical treatment, training and rehabilitation of a disabled dependent.
You have paid or deposited under any scheme framed LIC or any other insurer for maintenance of dependent
 For the above purpose, a “disabled dependent” is a person who satisfies the following conditions:
·         In case of Individual, dependent means the spouse, children, parents and brothers and sisters
·         in case of HUF, “dependent” means any member of HUF
·         Person suffers from any of the following disabilities: Disability should be not less than 40 percent.
o    Blindness
o    Low vision
o    Leprosy cured
o    Hearing impairment
o    Locomotor disability (related to bones, joints etc. leading to restriction in movement)
o    Mental retardation
o    Mental Illness (disorders other than retardation)
o    Autism
o    Cerebral Palsy
o    Multiple disabilities (i.e. combination of more than one disabilities below)

·         Such person should be wholly or mainly dependent upon such Individual or HUF for support and maintenance
·         Such person has not claimed any deduction under section 80U in computing his total income
How much deduction is allowed?
This section allows you to claim a “fixed” deduction at the time of filing the return irrespective of the actual amount incurred or deposited under Option 1/ Option 2.
Deduction depends upon the extent of disability (as certified by physician) as follows:
·         Disability is less than 40% – No deduction
·         Disability is more than 40% but upto 80% – Rs. 50,000 (fixed)
·         Disability is more than 80% – Rs. 1, 00,000 (fixed)
Let us understand with help of example:
Mr. Raj is a resident individual. He annually deposits a sum of Rs. 15,000 with LIC for the maintenance of his handicapped father who is wholly dependent upon him. For disability, a copy of certificate from medical authority is submitted.
As grandfather does not come within the definition of “dependent” in section 80DD, nothing shall be deducted under section 80DD.
As brother does come in the definition of “dependent”, Rs. 50,000 is deductible. If however, the dependent brother is a person with severe disability over 80%, then Rs. 1,00,000 is deductible.
What is the basis for claiming deduction?
For claiming the deduction, you shall have to procure a copy of the certificate issued by the medical authority. If the disability requires reassessment, you will have to obtain a fresh certificate after the expiry of the period mentioned on the original certificate in order to continue the claim the deduction every year.
Is there a prescribed format for certificate from medical authority? 
I have to obtain the certificate from which authority?
Certificate has to be signed by one of the following, to help in claiming deduction:
·         A Neurologist having a degree of Doctor of Medicine (MD) in Neurology (or, in case of child, a Pediatric Neurologist having an equivalent degree),
·         A Civil Surgeon or Chief Medical Officer (CMO) of a government hospital

 Section 80DDB

Neurological Diseases where the disability level has been certified to be of 40% and above,—
        (a)   Dementia ;
        (b)   Dystonia Musculorum Deformans ;
        (c)   Motor Neuron Disease ;
        (d)   Ataxia ;
        (e)   Chorea ;
         (f)   Hemiballismus ;
        (g)   Aphasia ;
        (h)   Parkinsons Disease ;
             (ii)   Malignant Cancers ;
            (iii)   Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;
             (iv)   Chronic Renal failure ;
              (v)   Hematological disorders :
         (i)   Hemophilia ;
        (ii)   Thalassaemia. 
·         The medical treatment is done for either you or your wholly / mainly dependent husband / wife, children, parents, brothers and sisters. If you are an HUF, expenditure may be done for any dependent member of the family.
What is the amount of deduction?
·         If person for whom expenditure is incurred is less than 65 years: Rs, 40,000 or the amount actually paid, whichever is lower.
·         If person for whom expenditure is incurred is greater than 65 years: Rs, 60,000 or the amount actually paid, whichever is lower.
Important note: Deduction eligible under this section shall be reduced by amount received, under insurance from an insurer, or reimbursed by an employer). .
Let us understand this with help of an example:
Manoj spends Rs. 2, 50,000 for medical treatment of his mother aged 70 years for a specified disease in April 2013. He had taken a mediclaim policy in name of mother and gets Rs. 1 lac as mediclaim reimbursement. How much deduction u/s 80DDB he can claim?
Answer: Since Manoj’s mother is senior citizen, Manoj is entitled for actual spent amount (Rs. 2.5 lacs) or Rs. 60,000 whichever is lower, i.e. Rs.  60,000. However, Section 80DDB says that amount received from insurance company/ employer is to be deducted. Now, since Rs. 1 lac has been received from insurance company, no deduction is available under this section.
However, had Manoj received Rs. 30,000 from insurance company, he could have claimed Rs. Rs. 30,000 (Rs. 60,000 – 30,000) as deduction u/s 80DDB.
From which authority is the certificate to be procured?
You have to submit a certificate of the prescribed format from neurologist/ oncologist/ a urologist/  haematologist/ immunologist or such other specialist, as may be prescribed, working in a Government hospital. 

 Who will give the certificate depends upon the type of disease, as per Rule 11DD of Income Tax Rules, following specialists can give the certificate: 
Neurological diseases
Neurologist having a Doctorate of Medicine (D.M.) degree in Neurology or any equivalent degree, which is recognised by the Medical Council of India;
Malignant cancers
Oncologist having a Doctorate of Medicine (D.M.) degree in Oncology or any equivalent degree which is recognised by the Medical Council of India
Chronic renal failure
Nephrologist having a Doctorate of Medicine (D.M.) degree in Nephrology or a Urologist having a Master of Chirurgiae (M.Ch.) degree in Urology or any equivalent degree, which is recognised by the Medical Council of India;
Hematological disorder
Specialist having a Doctorate of Medicine (D.M.) degree in Hematology or any equivalent degree, which is recognised by the Medical Council of India
 Note that the rule also provides that no such specialist is available in the Government hospital, such certificate, with prior approval of the Head of that hospital, may be issued by any other specialist working full-time in that hospital and having a post-graduate degree in General or Internal Medicine, which is recognised by the Medical Council of India.

 Section 80U
 Section 80U is very much similar to Section 80DD we discussed earlier, only difference is that where in Section 80DD the taxpayer’s family member is differently-abled person, and taxpayers spends for medical treatment for him, in Section 80U, the taxpayer can claim deduction if he/she himself is differently-abled. Definition of Disability mentioned in 80 U is same as 80DD. Please note that deduction under 80DD and 80U are mutually exclusive events.

 Note that since we are talking about an individual here, Section 80U applies only to individual. 

Aforesaid information has been compiled thanks to CA Abhinav Gulechha.

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