Section 80DD: Tax Deduction for the Maintenance of Dependent Disabled Persons

Topic Covers:

1. Introduction
2. Qualifying Criteria
3. Deduction Amount
4. Additional Information
5. Changes in ITR forms

Introduction:

This deduction under Section 80DD of the income tax act is available to both resident individuals (regardless of citizenship) and resident Hindu Undivided Families (HUFs). This deduction is allowed to assessee for expenditures made for differently abled dependent.

Qualifying Criteria:

1. Dependent Disabled Relative:

The taxpayer must have a dependent disabled relative, which includes:

For Individuals: Spouse, children, parents, brothers, and sisters of the individual.

For HUFs: Any member of the Hindu Undivided Family.

Definition of Dependent Relative:

“A relative is considered dependent if they rely mainly or wholly on the individual or HUF for financial support and maintenance.”

2. Disability Definition:

Disability is defined as per Section 2(i) of the Persons with Disabilities (Equal Opportunities, Protection of Rights, and Full Participation) Act, 1995. This includes conditions such as autism, cerebral palsy, and multiple disabilities, as specified in sec. 2(a), 2(c), and 2(h) of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities Act, 1999.

The person with a disability must have a certificate from a medical authority certifying 40% or more of one or more disabilities, including blindness, low vision, leprosy-cured, hearing impairment, locomotors disability, mental retardation, or mental illness.

3. No Benefit under Section 80U:

To claim deduction under section 80DD the dependent individual with a disability must not have claimed deductions under Section 80U.

4. Expenses on Disabled Relative:

The taxpayer should have:

• Incurred expenses for the medical treatment (including nursing), training, and rehabilitation of the dependent person with a disability, or

• Paid or deposited an amount in an approved scheme designed for the maintenance of the disabled dependent by entities like the Life Insurance Corporation or other insurers or the Administrator or Unit Trust
of India.

• The scheme should ensure payment of an annuity or a lump-sum amount for the benefit of the dependent person with a disability in the case of the taxpayer's death or upon the taxpayer attaining the age of 60
years or more, with discontinuation of payments or deposits.

5. Medical Certificate:

The taxpayer must provide a copy of the certificate issued by a medical authority when submitting their income tax return. The medical authority is defined as per Section 2(p) of the Persons with Disabilities Act, 1995, or as specified by the Central Government for certifying various disabilities.

Deduction Amount:

A deduction is restricted upto the prescribed amount as given below:

• If the relative is suffering from severe disability: ₹1,25,000.
• If the relative is suffering from a disability but not severe disability: ₹75,000.

Definition of Severe Disability:
A person with 80% or more of one or more disabilities, as specified in sec. 56(4) of the Persons with Disabilities Act, 1995, or

A person with a severe disability referred to in sec. 2(o) of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities Act, 1999.

Additional Information:

a. Revision of Medical Certificate:

If the disability status needs reassessment after a specific period, the taxpayer can claim this deduction only if they obtain a new certificate from the medical authority and submit it with their income tax return.

b. Treatment when Handicapped Person Predeceases (Sec. 80DD(3)):

If the taxpayer has deposited any amount in an annuity plan of LIC or UTI for the benefit of the disabled person, and the disabled person passes away, any amount received from such an annuity plan will be considered the taxpayer's income for the year of receipt.

However, there will be no taxation if the amount is received by the dependent person with a disability before their death as an annuity or lump sum upon reaching the age of 60 years or more, with the discontinuation of payments or deposits.

Changes in ITR forms

To claim the deduction under section 80DD from the financial year 2023-24 a new 'Schedule 80DD' has been inserted in the ITR forms. This schedule seeks details of deductions in respect of maintenance, including details of medical treatment of dependents with disabilities. These details comprise:

• Nature of the disability
• Type of dependent (spouse, son, daughter, father, mother, brother, sister or member of the HUF)
• PAN of the dependent
• Aadhaar of the dependent
• Date of filing and acknowledgement number of Form 10-IA
• UDID Number

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