Filing income tax returns can be confusing, especially when claiming deductions for medical expenses. However, the Indian Income Tax Act contains a special provision – Section 80DDB – that allows taxpayers to lower their taxable income if they have incurred costs for medical treatment of dependents suffering from certain chronic diseases.
This extensive guide explains everything you need to know about claiming deduction under Section 80DDB, the documentation required, and key points to remember.
What is Section 80DDB of the Income Tax Act?
Section 80DDB of the Income Tax Act, 1961 contains provisions for claiming tax deduction on medical expenditure incurred by a taxpayer for treatment of their dependent family members suffering from specified diseases.
This section was introduced to provide financial relief to individuals paying high costs for medical care of relatives with certain chronic conditions. The deduction applies to resident Indian assessees.
Who is Eligible to Claim the Deduction?
The deduction under Section 80DDB can be claimed by:
- Resident individual taxpayers
- Hindu Undivided Families (HUFs)
For individual taxpayers, the deduction can be claimed for medical expenses incurred on the below dependent family members:
- Spouse
- Children
- Parents
- Siblings
In case of a HUF, any member of the family can be considered a dependent and their treatment expenses can qualify for the tax deduction.
What Diseases Are Covered Under Section 80DDB?
The income tax laws have identified 5 categories of critical illnesses for availing deduction under Section 80DDB. These are:
- Neurological diseases: These include dementia, dystonia musculorum deformans, motor neuron disease, ataxia, chorea, hemiballismus, aphasia, and Parkinson’s disease. The disability level from these diseases must be certified to be 40% or more by a specialist doctor.
- Cancer: This covers malignant cancers of all organs diagnosed by an oncologist.
- Full blown AIDS: The deduction can be claimed if the dependent is diagnosed with full blown Acquired Immuno-Deficiency Syndrome (AIDS).
- Chronic kidney disease: This includes advanced kidney failures and end stage renal disease necessitating dialysis or transplant.
- Hematological disorders: Eligible disorders are hemophilia and thalassemia major.
Therefore, as a taxpayer, you can claim deduction under Section 80DDB only if a dependent family member is suffering from any of the above specified chronic illnesses. Common ailments like diabetes, hypertension, arthritis, asthma, tuberculosis, etc. do not qualify for this deduction.
What is the Deduction Amount Allowed?
As per current income tax rules, the maximum deduction that can be claimed under Section 80DDB is:
- For taxpayers below 60 years of age: ₹40,000 per year
- For senior citizens (60-80 years): ₹1 lakh per year
- For very senior citizens (above 80 years): ₹1 lakh per year
However, the actual deduction allowed will be lower of the following:
a) Actual amount spent on treatment
b) Maximum deduction limit as per age
So if your medical bills exceed the prescribed deduction limit, you can only claim up to the limit and not the full billed amount.
What Certification is Required for Claiming Deduction?
To claim deduction under Section 80DDB, you must obtain a certificate from specified medical specialists confirming diagnosis and treatment of the dependent.
The relevant specialists based on the disease are:
- Neurological diseases: Neurologist holding DM (Doctorate in Medicine) in Neurology
- Cancer: Oncologist with DM in Oncology
- AIDS: Postgraduate doctor in General Medicine or Internal Medicine
- Kidney failure: Nephrologist with DM in Nephrology or Urologist with MCh in Urology
- Hematological disorders: Specialist doctor with DM in Hematology
This certificate should clearly mention the patient’s name, age, disease, fees charged and other details. In case of treatment at a government hospital, the certificate must also state the hospital name and address.
If you receive any insurance payment or reimbursement from employer for the treatment, this amount must be deducted from the total deduction claim.
Documents Required to Claim Deduction
To successfully claim deduction u/s 80DDB, keep the following documents ready when filing your tax returns:
- Certificate from specialist doctor
- Original receipts for hospitalization, tests and medicines
- Discharge summary from the hospital
- Any payment receipts from insurer or employer as reimbursement
Key Points to Remember
When claiming deduction under Section 80DDB, keep the following important points in mind:
- Get the diagnosis and treatment certificates only from the specified specialist doctors as per the disease type
- Collect proper original bills, receipts and discharge summary as proof
- Ensure the patient meets the definition of dependent as per income tax rules
- Claim deduction only up to the prescribed limit based on your age
- Deduct any reimbursement received from the total deduction amount
- Furnish all documents with your income tax returns for smooth processing of deduction
- Avoid claiming expenses for common ailments not covered in the list of specified diseases
Summary
The Section 80DDB deduction provides much needed financial relief to taxpayers paying high medical bills for severe illnesses of dependent family members. Make sure you carefully assess your eligibility, get proper certification, maintain documents and claim deduction as per specified limits. Consult a tax expert such as Filingwala.com if you need assistance on using this provision. Being aware of such deductions can help you save tax and ease the stress of caring for loved ones with chronic health conditions.
Here are 10 additional FAQs on Section 80DDB deduction:
- Who issues the certificate for claiming deduction under Section 80DDB?
The certificate has to be issued by a specialist doctor like a neurologist, oncologist, nephrologist etc. depending on the disease. The specialist must have a recognized postgraduate degree or equivalent qualification.
- Can I claim the deduction if my wife undergoes a kidney transplant?
Yes, you can claim deduction up to ₹1 lakh under Section 80DDB for your wife’s kidney transplant and related expenses as it covers chronic kidney failure.
- Are dental treatments covered under Section 80DDB?
No, dental treatments do not qualify for deduction under Section 80DDB as they are not covered under the list of specified diseases.
- Can I claim deduction for autism treatment of my child?
No, autism and other developmental disorders are currently not in the list of eligible illnesses, so you cannot claim deduction for them under Section 80DDB.
- What documents are required if the patient dies during the treatment?
If the dependent dies during treatment, you would need death certificate along with the other documents like original bills, discharge summary etc. incurred till the time of death.
- How do I claim deduction if treatment is spread over 2 financial years?
You can claim deduction in each year up to the eligible limit based on when the expense was incurred. So bills pertaining to each year have to be used to claim deduction in that year.
- Can I claim deduction under 80DDB for my parents who are NRIs?
No, deduction under 80DDB is only available for resident ordinary taxpayers in India. Medical expenses incurred abroad for family members who are NRIs cannot be claimed.
- What if I don’t have all documents for past treatment when filing returns?
It is recommended to file your IT returns only when you have all the necessary documents. If you don’t have the documents, you cannot claim deduction under 80DDB.
- Can I claim the deduction every year for chronic condition treatment?
Yes, you can claim deduction under 80DDB each financial year as long as the expenses relate to treatment of an eligible illness of your dependent.
- Is CGHS/ECHS reimbursement taxable if claimed under 80DDB?
No, CGHS and ECHS payments received for medical expenses are non-taxable. So you can claim deduction on remaining expenses not covered under CGHS/ECHS.
