Chapter VI A of the Income Tax Act, 1961 gives detail on the deductions that are permissible from the gross total Income. These details about deductions are specified under Section 80C to 80U of Chapter VIA.
Let us have a look at some of the deductions that are specified in Sections 80C to 80U of Chapter VIA.
- Section 80C
Investments made into investment tools like life insurance policies, PPF or payments made towards the repayment of house loans, tuition fees of school, etc. are eligible for tax deductions. The maximum limit for deductions that can be made under Section 80C is Rs.1, 50,000.
- Section 80D
Section 80D of Chapter VIA describes the deductions that can be made with respect to the premiums paid for health insurance policies. The maximum limit for deductions with respect to health insurance premium for self, spouse, and children is Rs.25, 000, whereas it can be Rs. 50,000 if the taxpayer includes his parents who are senior citizens into the health insurance policy.
- Section 80DD
Under Section 80DD, any expense which is incurred due to treatment or maintenance of a differently abled person qualifies for deductions with the maximum limit being Rs. 75,000. This benefit can be availed by individuals or Hindu Undivided Family.
It is quite necessary to have a clear understanding of the deductions so as to make a correct calculation on the net taxable income of a taxpayer.
Now, let us discuss in detail about the deductions specified in Section 80DDB and the implications of these deductions.
Deductions under Section 80DDB
Section 80DDB of the Income-tax Act, 1961 provides deduction for specified diseases covered under Rule 11DD.
List of diseases as covered under Rule 11DD of Income Tax Rules, 1962 are as under:
1. Neurological Diseases where the disability level has been certified to be of 40% and above,—
Dystonia Musculorum Deformans
Motor Neuron Disease
2. Malignant Cancers
3. Full Blown Acquired Immuno-Deficiency Syndrome (AIDS)
4. Chronic Renal failure
5. Hematological disorders
Eligibility Criteria to claim deductions under Section 80DDB
- Tax deductions under Section 80DDB can be claimed by all resident individuals and Hindu Undivided Family.
- In the case of a resident individual, he can claim the tax deductions under Section 80DDB if he has incurred the expenditure in the treatment of himself or his dependents.
- In case of Hindu Undivided Family, the tax deductions under Section 80DDB can be claimed if the incurred expenditure is associated with the treatment of any member from the Hindu Undivided Family.
- The provisions for tax deductions under Section 80DDB are not available to NRIs.
Dependents for Individuals and Hindu Undivided Families
Who will qualify as dependents for individuals and Hindu Undivided Families?
To claim the deductions under Section 80DDB, the dependents of individuals and Hindu Undivided Families are classified into two categories.
In case of individuals, dependents can be spouse, child i.e. son or daughter, parents, siblings. In case of Hindu Undivided Families, any member of the Undivided Family qualifies for being a dependent.
Specification of deduction limit under Section 80DDB
Let us discuss on the deduction limit that has been specified under Section 80DDB of Chapter VIA.
The two major factors which determine the deduction limits under Section 80DDB are mentioned below.
- The age of the person for whom the medical expenditure has been incurred.
- The actual expenditure that has been incurred.
For the Financial year 2018-19, the specifications on deduction limits can be described as below.
- For normal scenario, the taxpayer i.e. either an individual or a Hindu Undivided Family are eligible for a tax deduction of either Rs. 40,000 or the actual amount that has been spent whichever is less.
- Suppose, the person who is undergoing the medical treatment is a senior citizen then the taxpayer would be eligible for a tax deduction of Rs.60, 000 or the actual amount that has been incurred as medical expenditure whichever is less.
- Suppose, the person who is undergoing the medical treatment is a super senior citizen i.e. above 80 years of age then the taxpayer would be eligible for a tax deduction of Rs.80,000 or the actual amount that has been incurred as medical expenditure whichever is less.
- The amount of deduction which is allowed under Section 80DDB will be reduced by the amount which is received for the medical treatment of the specified person as insurance from an insurance provider or if reimbursed by an employer.
Deduction Limits under Section 80DDB for Financial Year 2019-20
New deduction limits have been specified under Section 80DDB as per the amendments made in the Union Budget for the Financial Year 2019-20.
Let us represent the new deduction limits under Section 80DDB in a tabular form.
Age Group of the person undergoing treatment
Up to 60 years of age
Rs.40, 000 or the actual amount spent on treatment whichever is less.
Senior Citizen i.e. 60-80 years of age
Rs.1, 00,000 or the actual amount spent on treatment whichever is less.
Super Senior Citizen i.e. above 80 years of age
Rs.1, 00,000 or the actual amount spent whichever is less.
Documents needed for availing benefits under Section 80DDB
There is a list of mandatory documents which need to be provided in order to avail the benefits under Section 80DDB.
It is mandatory for the taxpayer to provide proof of the need for treatment and proof that the treatment has been actually undertaken. This means it is necessary to obtain a prescription for the treatment from qualified doctor.
Previously, it was a mandate to provide prescriptions from doctors of Government hospital. But, there have been some amendments and since financial year 2016-17 prescriptions from doctors of both Government and Private hospitals are permissible. The prescription can be obtained from a relevant specialist in Medicine with the degree being recognized by the Medical Council of India.
The prescription which is to be submitted by the taxpayer should contain details mentioned below.
- Name of the patient
- Age of the patient
- Disease or ailment
- Name, Address and registration number of the specialist doctor issuing the prescription,
- Name and Address of the Government Hospital if the treatment has been undertaken in a Government Hospital etc.
Hence, according to Rule 11DD under Section 80DDB, there are certain tax benefits which can be availed by the individuals and Hindu Undivided Families with respect to diseases and treatment of specific ailments. These tax deductions are usually calculated from the Gross total income to obtain the net taxable income of a taxpayer. However, according to Section 80A of Income Tax Act the amount of deductions should not be more than the Gross Total Income of a taxpayer.
- What are the deductions under Section 80DDB?
Under section 80DDB, tax deductions can be claimed by an individual or a Hindu Undivided Family for the medical treatment of self or dependent relatives.
- Who can be a disabled dependent?
For individuals, spouse, children, parents or siblings can be disabled dependent. For Hindu Undivided Family, any member of the family can be disabled dependent.
- Who is eligible to claim deductions under Section 80DDB?
Resident individuals or Hindu Undivided Family are eligible to claim deduction under Section 80DDB.