A resident individual/HUF, incurring expenditure on maintenance of relative dependent, being a person with disability, can claim deduction under section 80DD. Deduction is available in respect of any of the following:

(a) Expenditure incurred on medical treatment (including nursing), training, rehabilitation of a dependent person with disability.

(b) Amount paid or deposited under a scheme of LIC or any other insurer or UTI or specified company duly approved by the Board, for maintenance of dependent person with disability.

Dependent person with disability means:

1) In case of an individual, it will include spouse, children, parents, brothers and sisters of the individual, or any of them who is mainly or wholly dependent on such individual; and

2) In case of a HUF, it will include any member of the HUF, who is mainly or wholly dependent on such HUF.

Provided that such dependent person has not claim any deduction under section 80U.

Disability Means:-

Such person is suffering from a specified disability which generally includes blindness, low vision, leprosy-cured, hearing impairment, locomotor’s disability, mental retardation and mental illness [see section 2(i) of the Person with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 ], it will also include “autism”, “cerebral palsy”, and “multiple disability”, referred to in clauses (a), (c) and (h) of section 2 of National Trust for welfare of Person with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999.

Person with severe disability means:-

1.A person with 80% or more of one or more disabilities, as referred to in section 56(4) of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996); or

2.A person with severe disability referred to in clause (o) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999).

Amount of deduction

If the taxpayer incurs any expenditure as mentioned in (a) or (b) above, then a flat deduction of Rs. 75,000 is available, irrespective of the amount of such expenditure. However, if the dependent person is suffering from severe disability (i.e., disability of 80% or above), then the amount of deduction will be Rs. 1,25,000.

Condition while claiming deduction under section 80DD:

 The taxpayer should obtain a copy of certificate (Form No. 10-IA) issued by the medical authority (fresh certificate is required in case of reassessment of disability after the expiry of the period mentioned in original certificate).

FORM NO. 10-IA

[See sub-rule (2) of rule 11A]

Certificate of the medical authority for certifying ‘person with disability’, ‘severe disability’, ‘autism’, ‘cerebral palsy’ and ‘multiple disability’ for purposes of section 80DD and section 80U

                                      Certificate No.

                          Date :

This is to certify that Shri/Smt./Ms ______________________son/daughter of Shri ________________, age years____________ male/female*________________ residing at___________________ , Registration No._____________ is a person with disability/severe disability* suffering from autism/cerebral palsy/multiple disability*.

2. This condition is progressive/non-progressive/likely to improve/not likely to improve*.

3. Reassessment is recommended/not recommended after a period of months/years*.

Sd/-

(Neurologist/Pediatric Neurologist/Civil Surgeon/ Chief Medical Officer*)

Name :

Address of Institution/Government hospital :

Qualification/designation of specialist :

SEAL

Signature/Thumb impression* of the patient

Note : *Strike out whichever is not applicable.

Meaning of Medical authority for issuing certificate   :-

medical authority” means the medical authority as referred to in clause (p) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996) [or such other medical authority as may, by notification, be specified by the Central Government for certifying “autism”, “cerebral palsy”, “multiple disabilities”, “person with disability” and “severe disability” referred to in clauses (a), (c), (h), (j) and (o) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999)];

If the dependent dies before taxpayer or the member of HUF

If the dependent predeceases the taxpayer or the member of HUF referred then amount paid or deposited in a scheme of LIC or any other insurer or UTI or specified company duly approved by the Board, for maintenance of dependent person with disabilitys hall be charged to tax in the hands of the taxpayer for the previous year in which such sum is received.

Illustration

Brother of Mr. Raja (a resident) is totally blind and is dependent on Mr. Raja. During the year 2015-16, Mr. Raja has incurred expenditure of Rs. 10,000 on training and rehabilitation of his brother. Can Mr. Raja claim any deduction in respect of expenditure incurred by him on maintenance of his physically handicapped brother?

In this case, all the criteria of section 80DD are satisfied and hence, Mr. Raja can claim a flat deduction of Rs. 1,25,000 under section 80DD (since his brother is suffering from 100% disability).

Suppose in the above case, instead of 100% disability, his brother is suffering from disability of less than 80%, then the amount of deduction will be limited to Rs. 75,000.

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As per section 80DDB of Income Tax Act , a taxpayer can claim deduction in respect of expenditure incurred by him on medical treatment of specified diseases. The provisions in this regard are as follows:

What are the ” specified diseases or ailments ” for claiming tax benefit of expenses on medical treatment of specified diseases ?

specified diseases or ailments are defined in Rule 11DD as follow :-

11DD . (1) For the purposes of section 80DDB, the following shall be the eligible diseases or ailments :

(i)           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.

Who should issue prescription of ” specified diseases or ailments ” for claiming tax benefit of expenses on medical treatment of specified diseases ?

The prescription in respect of the diseases or ailments specified shall be issued by the following specialists:—

(a)          for 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 ;

 – a Neurologist having a Doctorate of Medicine (D.M.) degree in Neurology or any equivalent degree, which is recognised by the Medical Council of India;

(b)          for Malignant Cancers – an Oncologist having a Doctorate of Medicine (D.M.) degree in Oncology or any equivalent degree which is recognised by the Medical Council of India;

(c)          for Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ; – any specialist having a post-graduate degree in General or Internal Medicine, or any equivalent degree which is recognised by the Medical Council of India;

(d)          for Chronic Renal failure  – a Nephrologist having a Doctorate of Medicine (D.M.) degree in Nehprology 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;

(e)          for  Hematological disorders :

(i)           Hemophilia ;

(ii)          Thalassaemia.

– a specialist having a Doctorate of Medicine (D.M.) degree in Hematology or any equivalent degree, which is recognised by the Medical Council of India :

where in respect of any diseases or ailments the patient is receiving the treatment in a Government hospital, the prescription may be issued by any specialist working full-time in that hospital and having a post-graduate degree in General or Internal Medicine or any equivalent degree, which is recognised by the Medical Council of India.

What should be mentioned in prescription of ” specified diseases or ailments ” for claiming tax benefit of expenses on medical treatment of specified diseases ?

The prescription shall contain the name and age of the patient, name of the disease or ailment along with the name, address, registration number and the qualification of the specialist issuing the prescription:

where the patient is receiving the treatment in a Government hospital, such prescription shall also contain the name and address of the Government hospital.

Is it necessary that prescription of  ” specified diseases or ailments ” should be issued by Government hospital ?

No it is not  necessary that prescription of  ” specified diseases or ailments ” should be issued by Government hospital .

However where in respect of any diseases or ailments the patient is receiving the treatment in a Government hospital, the prescription may be issued by any specialist working full-time in that hospital and having a post-graduate degree in General or Internal Medicine or any equivalent degree, which is recognised by the Medical Council of India.

where the patient is receiving the treatment in a Government hospital, such prescription shall also contain the name and address of the Government hospital.

Read Also Govt allows deduction under section 80DDB for treatment of disease on basis of certificate of private hospitals

Who can claim tax benefit of expenses on medical treatment of specified diseases ?

Deduction under section 80DDB can be claimed by an individual or a HUF, who is resident in India.

In case of an individual :expenditure should be incurred on medical treatment of an individual or wholly/mainly dependent spouse, children, parents, brothers and sisters of the individual;

 In case of a HUF :expenditure should be incurred on the medical treatment of any member of the family, who is wholly/mainly dependent on such HUF.

How much amount can be claimed as tax benefit of expenses on medical treatment of specified diseases ?

Amount of deduction will be lower of the following:

(a) amount actually paid on medical treatment specified above; or

(b) Rs. 40,000.

However, the limit of Rs. 40,000 will be increased to Rs. 60,000, if the expenditure is incurred on medical treatment of a senior citizen (i.e., any resident individual of age of 60 years or above but less than 80 years and to Rs. 80,000 if the expenditure is incurred on the medical treatment of super senior citizen i.e. resident individual of the age of 80 years or above).

Note : . From the amount of deduction computed in aforesaid manner, amount, if any, received by the taxpayer from any insurer or from his employer, by way of reimbursement for such expenditure shall be deducted.

Illustration

During the financial year 2015-16, Mr. Raja spent Rs. 1,00,000 on medical treatment of specified diseases of his brother (age 48 years) who is wholly dependent on him. He received Rs. 25,000 by way of reimbursement of such expenditure from a medical insurance policy. Can he claim any deduction in respect of expenditure incurred by him on medical treatment of specified diseases?

In this case, all the conditions of section 80DDB are satisfied and hence, Mr. Raja can claim deduction under section 80DDB. Deduction under section 80DDB will come to Rs. 15,000 (i.e., Rs. 40,000 maximum limit of deduction – Rs. 25,000 reimbursement from a medical insurance policy).

If his brother is a senior citizen (i.e. resident and of the age of 60 years of above but less than 80 years), then the amount of deduction will be Rs. 35,000 (i.e., Rs. 60,000 maximum limit of deduction – Rs. 25,000 reimbursement).

Suppose in above case, the amount received from insurance policy is Rs. 65,000 instead of Rs. 25,000, then the amount of deduction will be NIL (in both the situations), since the amount of reimbursement exceeds the maximum amount of deduction i.e., Rs. 40,000 or Rs. 60,000, as the case may be.

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Buy Property on Loan

While buying A house is the biggest purchase most people make in their lifetime and the government realises this. To give buyers relief, the government has allowed income tax (I- T) deductions if the property is bought on a loan.

Principal amount Repaid : Claim Deduction u/s 80C

Under Section 80C, the borrower can claim deduction of up to Rs. 1.5 lakh on repayment of princiapl component of Home Loan

Interest on loan :-

For a self- occupied property, a Rs. 2 lakh benefit is available under Section 24 (b) of the Income Tax Act for interest on the home loan. If the property is not self- occupied, the entire interest paid to the lender can be deducted from income. This applies even if a person borrows money from a friend, his family or a private lender provided appropriate loan document between the borrower and private lender is done and there is either a letter or a confirmation of interest charged by lender.

Problem area:

Under the current market conditions, project delays are a common thing. This can cause financial trouble to the borrower. A person can’t claim deduction for the interest if his or her house is still under construction.

A buyer can, however, get benefit for the principal amount. On possession, the borrower can claim deduction for the interest paid during the pre- construction period. This needs to be done in five equal instalments, starting the financial year you are handed the property.

Tip: To take advantage of current laws, a couple should take a joint loan in equal proportion. House on which loan is taken should also be in the joint names.  This will allow each to claim full tax deductions available for the principal and interest. This also applies to a child and a parent. While you own it If it’s the borrower’s only house and self- occupied, there’s no taxation.

More than Two House 

For those who have two or more houses and these are neither let out nor occupied, the taxation can get tricky. According to I- T laws, in such cases the owner should take a notional rent value and pay tax on it. There’s a prescribed method to calculate the notional value, which takes into consideration the municipal value of the property and the rent control legislation (either of the two) or the prevailing rent in the area for a similar house.

In a case of a notional rent, there is no rule to submit a certificate from a third party. However, it’s better that a person submits a letter from a broker stating the prevalent rent in the area

House Rent Alloawnce

Problem area: If you are claiming housing loan deductions and housing rent allowance (HRA) at the same time, it can cause trouble. Many people claim HRA by showing rent paid to parents or wife (if there’s a house in their names). A taxpayer is allowed HRA and loan deductions both under certain conditions. For example if your house is in a different city than that of residence. The department also allows you to claim HRA if you have a house in the same city as your residence, but you need to have a genuine reason. For example, many people in metros such as Delhi and Mumbai own house in far- off suburbs and can find it difficult to commute, owing to the distance. In such case, the person can claim both.

Tip: While calculating the notional value of a second home, you are allowed to claim few deductions such as municipal taxes. Also, an owner can claim deduction of a sum equal to 30 per cent of the value of the house property towards repair and maintenance charges.

Sale of Property

While selling When a person sells a property, he or she needs to pay tax on the profits made. If sold within three years of acquisition, the seller needs to pay short- term capital gains tax (STCG). In this case, the profits are combined with the income and taxed on the I- T slab rate. If the property is held for more than three years, it attracts long- term capital gains tax (LTCG). The tax is levied at 20 per cent ( plus surcharge and cess) after adjusting the gains for inflation using the cost inflation index the government issues.

A seller can save entire tax outgo if he or she uses proceeds equivalent to long- term capital gains for buying a new house located within India within one year prior to the sale date or two years from the sale date. If the property is under construction the time period permitted is three years. The amount used for buying a new property is exempted from tax and if there’s any balance, it will be taxed at a flat 20 per cent ( plus cess and surcharge). If you are not immediately buying a house, this money needs to be kept in the Capital Gains Account Scheme (CGAS), and withdrawn within the stipulated timeframe.

If you don’t want to go for a residential property, you can still save LTCG tax by investing in specified bonds issued by the National Highways Authority of India or Rural Electrification Corp ( under section 54/ 54EC) within six months from the date of sale. These bonds have a lock- in period of three years.

Also, the seller can only invest a maximum of Rs. 50 lakh in these bonds, while you have to pay tax on the remaining amount.

Problem area: If the seller had inherited the property or it was gifted to him, the capital gain will be computed on the basis of the cost to the previous owner. If the house was purchased before April 1, 1981, the I- T department will consider the acquisition cost by the original owner or the fair market value of the property as on April 1, 1981, whichever is higher. If a person sells an under construction property after holding it for over three years, the taxation rules completely change. This is because the I- T department considers the person as a property owner only when he or she has received possession.

Tip: While calculating STCG and LTCG tax on sale of property, one can deduct the money spent on improvement and also cost for acquiring the asset such as stamp duty, legal fees, and payment of brokerage.