Do you have a handicapped dependent? Do you incur expenses on his or her maintenance? Do you undertake expenditure for their medical treatment? Have you invested in an insurance policy, where the beneficiary is your disabled dependent?
If yes, you could be saving income tax under section 80DD of the Income Tax Act.
[Article inspired by a query from reader M K Pratap]
Having a disabled dependent can be a very big responsibility. Apart from being fully responsible for the person, you can also incur a lot of expenditure for them.
The Income Tax Act comes to your rescue in this situation. Section 80DD of the IT act provides you a facility of claiming a deduction if you have a handicapped dependent.
How much income tax can you save?
The deduction allowed is Rs. 50,000 / Rs. 75,000 depending on the extent of the disability of your dependent.
A deduction of Rs. 50,000 is allowed if you have a disabled dependent. Whereas a deduction of Rs. 75,000 is allowed if your dependent has severe disability.
Remember: this is a lump-sum deduction, and doesn’t depend on the amount that you spend on the disabled dependent.
The income tax that you can save would depend on the tax bracket that you fall into – it can range from Rs. 5,000 to Rs. 15,000 (for Rs. 50,000 deduction) or from Rs. 7,500 to Rs. 22,500 (for Rs. 75,000 deduction).
(To know the current income tax slabs, please read “Budget 2008 – Impact of Income Tax Slab / Bracket Changes on You”)
How do you qualify for this deduction?
You can claim deduction u/s 80DD if:
1. You spent on the medical treatment, training and rehabilitation of a disabled dependent (Amount spent for nursing is considered as expenditure on medical treatment)
2. You paid an amount for a scheme (offered by Unit Trust of India (UTI), Life Insurance Corporation (LIC) or any other insurer) meant to take care of the maintenance of your disabled dependent in case of your untimely death.
Some considerations for the insurance premium
- Not all schemes qualify – there are specific schemes meant for this purpose. Life Insurance Corporation (LIC) has a policy specifically for this purpose – it is called Jeevan Aadhar Plan.
- The policy has to insure your life. That is, it should be in your name.
- The policy has to pay an annuity (a fixed amount every year) or a lump sum amount for the benefit of the disabled dependent
- As the nominee for the policy, you need to name either (a) your disabled dependent, or (b) any other person or trust that would receive the money for the benefit of your disabled dependent
- In case your disabled dependent predeceases you (that is, dies before you), the amount in the policy is returned to you. This would be treated as your income for the year in which you receive it, and would be fully taxable in your hands.
What is considered as disability?
Disability would be as defined by the “Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995”.
It includes the following:
- Low vision
- Hearing impairment
- Locomotor disability
- Mental retardation
- Mental illness
A person with disability means a person suffering from not less than 40% of any of the above disabilities.
Severe disability means 80% or more of one or more of the above disabilities.
Who is qualified to claim this deduction?
Any individual or a Hindu Undivided Family (HUF) can claim this deduction.
Please note that the individual or HUF has to be a resident of India – a non-resident Indian (NRI) can not claim deduction u/s 80DD.
Definition of relative: Who can be your disabled dependent?
For individuals, your spouse, son / daughter (any child), parents and brother / sister (siblings) can be your handicapped dependents.
For HUFs, any member of the HUF can be a disabled dependent.
The disabled person should be wholly or mainly dependent on you for his / her support and maintenance, and should not have claimed deduction under section 80U.
What are the requirements?
You need to have a proof of disability for your dependent to claim deduction under section 80DD. You need to get a certificate of disability from relevant medical authorities.
For people having Autism, Cerebral Palsy or multiple disabilities, form number 10-IA needs to be filled up. There are two other formats for mental illnesses and all other disabilities.
(Please scroll down to download the forms / formats / specimen)
The relevant authorities who can sign these forms are:
- A Neurologist having a degree of Doctor of Medicine (MD) in Neurology (or, in case of children, a Pediatric Neurologist having an equivalent degree)
- A Civil Surgeon or Chief Medical Officer (CMO) of a government hospital
Here are the forms (or format of certificates) that you would require to claim deduction under section 80DD.
|Form / Format||Purpose|
|Download Form 10-IA||For Autism, Cerebral Palsy or multiple disabilities|
|Download the format||Certificate of mental retardation|
|Download the format||Certificate of any other disability|
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