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Section 80DD of the Income Tax Act:
 
Deduction in respect of maintenance including medical treatment of a dependent who is a differently abled person(person with disability)-

An assessee shall be allowed a deduction of Rs. 75000 from his gross total income U/S 80DD, when during the previous year he incurs expenditure on any of the following two:
  1. incurs any expenditure on medical treatment(including nursing), training and rehabilitation of a differently abled dependent (person with disability); or
  1. paid/deposited any sum under the specified schemes of LIC or any other approved insurer or administrator, for the maintenance of a dependent who is a differently abled person (person with disability).
The amount of deduction U/S 80DD will be Rs. 125000, if the differently abled dependent is a person with severe disability ie. 80% or more of the defined disabilities.

Important Points of Section 80DD:
  • Expenditure/deposit shall be incurred for a dependent: The differently abled person in respect of whom the expenditure is incurred shall be dependent on the assessee.
  • Dependent meaning: For claiming deduction Section 80DD dependent means spouse, children, parents, brothers and sisters of the individual.
  • Disability: Disability is given the meaning as per Section 2(i) of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act 1995. Disability also includes autism, celebral palsy and multiple disability.
click here to understand in detail the defined disabilities
  • Differently abled person(Person with disability): means a person having any disability as stated above of not less than 40%.
  • Severe Disability: A disability of 80% or more is referred as severe disability.
  • No deduction is claimed U/S 80U: Such differently abled dependent person shall not claim any deduction U/S 80U while filing his/her own return for that year.
  • Approved Scheme of LIC or others: shall provide for annuity or a lump sum payment for the benefit of the differently abled dependent, in case of death of the individual who has deposited in the scheme.
  • Certificate issued by Medical Authority: for claiming deduction U/S 80DD, copy of certificate of disability from an approved medical authority shall be furnished along with the return of income.
 Click here for more detail about Approved Medical Authority for Section 80DD
However presently with online returns no certificates are attached, but certificates must be kept safely to be furnished to Assessing Officer when asked for.
  • If the differently abled dependent predeceases the individual: If event of death of the differently abled dependent takes place before the individual, an amount equal to the amout paid/deposited under option 2 above(in the LIC/other approved scheme) shall be taken as income of the individual and accordingly shall be chargeable to tax in the previous year in which the amount is received by him.
  • Production of Bills of treatment of differently abled dependent is not required:
As per CBDT Circular No. 775 dated 26/03/1999: "It is clarified that it would be sufficient if the employee furnishes a medical certificate from a Government hospital and a declaration in writing duly signed by the claimant certifying the actual amount of expenditure on account of medical treatment (including nursing) training and rehabilitation of the handi­capped dependant and receipt/acknowledgement for the amount paid or deposited in the specified schemes of LIC or UTI. Therefore, DDOs may not insist upon production of vouchers/bills by the employees for having incurred expenditure on medical treatment of their handicapped dependants for allowing the deduction under section 80DD for the purpose of computing tax deductible at source."
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