There are several options to cut back on an individual’s income tax under Section 80 of the IncomeTax Act, 1961. One such deduction available to the taxpayer is Section 80DDB. Such deduction can be availed on any medical expense incurred towards the treatment of certain specified diseases affecting the taxpayer himself or his dependent. This is irrespective of whether the taxpayer has paid a premium for a health insurance policy or not.
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The deduction can be claimed from the taxpayer's gross total income prior to calculating the taxable income on which the tax will be levied. The only condition to be met is that the medical expense incurred is only for a ‘specified’ disease.
Decoding the law
Deduction under Section 80DDB can only be claimed by a resident individual or by a resident HUF (Hindu Undivided Family) for a member. Non-resident individuals (NRIs) and non-resident HUFs are not eligible to claim this deduction.
This deduction can only be claimed on the medical expenses incurred by the taxpayer on himself or on a wholly or mainly dependent individual. As per the law, the dependant includes the spouse, children, parents and siblings of the taxpayer. In the case of a HUF, the deduction can be claimed for the medical expense incurred for a member of the HUF.
Specified diseases covered
As mentioned earlier the section allows for deduction only on the medical expense incurred for treatment of specific diseases. The list of diseases is as mentioned in Rule - 11DD in the Income Tax Rules:
a) Malignant Cancers;
b) Full-Blown Acquired Immuno-Deficiency Syndrome (AIDS);
c) Chronic Renal failure;
d) Haematological disorders: (i) Hemophilia and (ii) Thalassaemia
e) In case of the below mentioned Neurological diseases where the disability level has been certified to be of 40 per cent and above: (i) Dementia; (ii) Dystonia Musculorum Deformans; (iii) Motor Neuron Disease (iv) Ataxia; (v) Chorea; (vi) Hemiballismus; (vii) Aphasia; (viii) Parkinsons Disease
Medical expenses incurred on any disease apart from the ones mentioned above are not eligible to be claimed as a deduction under section 80DDB. The assessee must obtain the prescription for the medical treatment from a neurologist, a urologist, or other such specialists, depending on the case.
Amount of the deduction
As per the present rules, the amount of claim varies on the basis of the age of the person. For any expenditure incurred for an individual below the age of 60 years, the maximum deduction that can be claimed is Rs. 40,000 in a particular FY. In the case that the person is over 60 years of age, the maximum deduction that can be claimed is Rs 1,00,000 from FY 2018-19 onwards.
The deduction will be reduced by the amount reimbursed by an employer or the amount received from the insurer for the treatment of the person. Here is an example:
Let’s assume that in an FY, the expenses incurred for the treatment of an individual (under age of 60 years) for any of the specified disease is Rs 60,000.
Below are three cases and how many deductions can be claimed in these situations.
Case 1: Assuming no amount was received from the insurer or reimbursement from the employer was not received. The assessee is eligible to claim a deduction of the total Rs 40,000.
Case 2: Assuming the assessee does receive an amount of Rs 20,000 as part of reimbursement from their employer or insurer; the assessee can only claim the balance amount of Rs 20,000 of the total deductible amount of Rs 40,000.
Case 3: If the reimbursement amount is higher than the claimable deduction of Rs 40,000, the assessee will not be eligible for any further deduction under Section 80DDB.
The same calculation applies in the case of senior citizens (above the age of 60 years), except for that, they are eligible for a higher deduction of Rs 1,00,000 from the FY 2018-19.
Archit Gupta is the founder and CEO of ClearTax
First Published: Mar 22, 2019 11:59 AM IST
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