Income Tax Act 1961 is a guide to direct taxes in India. It specifies that all income earned in India is taxable.
Deductions under Chapter VI-A of the Income Tax Act
Net Taxable Income = Gross Taxable Income Less Deductions under Chapter VI A
To compute the Net Taxable Income, we need to deduct such amounts from the Gross Total Income as are allowed under Chapter VI-A of the Income Tax Act 1961.
Chapter VI A of the Income Tax Act 1961 specifies in detail the permissible deductions from the gross total income under section 80C to 80U of the Income Tax Act. Section 80A of the Income Tax Act specifies that the amount of such deductions shall not exceed the amount of Gross Taxable Income of the assessee. Deductions under this chapter cannot be claimed against long term capital gains, short term capital gains covered under section 111A, winnings from horse races or lotteries or such other income covered under section 115BB or income covered under section 115A, 115AB, 115AC, 115AD, 115BBA and 115D
Chapter VI A is a comprehensive chapter covering deductions in respect of various investments or payments made or expenses incurred by the assessee. Some of them are noted below:
- Section 80C provides for deduction in respect of any contribution made by the assessee towards various investments like life insurance policies and PPF, payment towards repayment of principal portion of a housing loan, payment of tuition fees to school etc. The maximum amount of deduction that can be claimed under section 80C is capped at Rs. 1, 50,000/-.
- Section 80D specifies deduction in respect of payments of premiums made under health insurance policies. Premium paid towards health insurance policy of the assessee or his family capped at a maximum of Rs. 25,000/- while that of the assessee or his parents, being senior citizens, capped at Rs. 30,000/-.
Section 80DD: Any expenditure incurred by an individual or HUF towards medical treatment or maintenance of a person with disability is allowed as a deduction to the extent of actual expenses but limited to Rs. 75,000/-
Thus, each section covers different types of expenses or investments allowed as deduction, the conditions that need to be met to claim such deductions and the amount which can be claimed as deduction.
Thus, for computing the net taxable income of any assessee, it is important to understand the application of deductions under Chapter VI A of the Income Tax Act 1961.
We have discussed below in detail the manner in which Section 80DDB would be applied.
Section 80DDB speaks of deductions in respect of expenses incurred for medical treatment of specified diseases or ailments.
Section 80DDB provides that were an individual or an HUF has incurred medical expenses for treatment of specified disease or ailment such expense is allowed as deduction, subject to such conditions and capped at such amount as specified, under Section 80DDB of Income Tax Act.
Here, the section speaks of medical expenses incurred on treatment of specified diseases or ailments and should not be confused with premium paid for health insurance bought covering such diseases or ailments. The payment for health insurance is covered under Section 80D of the Income Tax Act.
Who can claim the deduction under Section 80DDB?
Deduction under Section 80DDB can be claimed only by individuals and HUFs. That is no deduction under this section can be claimed by corporates or any other entity. Further, deduction under section 80DDB can be claimed only by the assessee who is a resident of India during the relevant previous year. That is the section does not apply to non-resident Indians.
Further, it is imperative that deduction can be claimed only by the person who has actually incurred the expenses. Thus, in case of Section 80DDB, deduction can be claimed by the individual and HUF who has actually incurred such medical expense.
Whose medical treatment can be allowed as deduction under section 80DDB?
Deduction under section 80DDB can be claimed only by the person incurring the expenses. However, the medical expenses can be incurred for the treatment of the following people:
- Individuals: In case of an individual, the medical expense can be incurred on the medical treatment of the assessee or any of his dependents. The ‘dependents’ in respect of this section would include spouse, his children, his parents, brothers and sisters of the individual or any of them. The dependent as the world suggests should be ‘dependent on the individual’ for his or her maintenance and support.
- Hindu Undivided Family (HUF): In case of an HUF, the medical expense can be claimed as deduction wherein the same are incurred for medical treatment of any member of the HUF.
What kind of medical treatments are allowed under section 80DDB?
Deduction under section 80DDB is allowed for medical expenses incurred for medical treatment of specified diseases or ailments. The nature of diseases and ailments which are included for deduction under Section 80DDB are mentioned in Rule 11DD of Income Tax and the same are as follows:
- Neurological Diseases as identified by a specialist ,where the level of disability has been certified to be of 40% and above and covers Dementia, Dystonia Musculorum Deformans, Chorea, Motor Neuron Disease, Ataxia, Aphasia, Parkinson’s Disease and Hemiballismus.
- Malignant Cancer
- AIDS- Acquired Immuno-Deficiency Syndrome
- Chronic Renal failure
Hematological disorders like Hemophilia or Thalassaemia.
Thus, the section intents to cover medical treatment for major illnesses and diseases and would not cover medical expenses which are more common in nature like a cataract or a C-section.
What documents are required to claim deduction under Section 80DDB?
To claim deduction under section 80DDB, it is mandatory for the assessee to provide a proof of the need for treatment and a proof that the treatment has been actually undertaken. Therefore, it is compulsory to obtain a prescription for such treatments from a qualified doctor.
Earlier it was required to obtain such prescription from doctors of government hospital. However, the same has been relaxed with effect from AY 2016-17 and prescription can now be obtained from relevant specialist from private hospitals and not necessarily a doctor working with a government hospital. Rule 11DD now stands amended and the prescription can now be obtained as follows:
- In case of neurological diseases, a prescription from a Neurologist having a Doctorate of Medicine in Neurology or any equivalent degree is required.
- In case of Malignant Cancer, a prescription by an Oncologist having a Doctorate of Medicine in oncology or any equivalent degree is required.
- In case of AIDS, a prescription by any specialist having post graduate degree in general or internal medicine or any equivalent degree is required.
- In case of Chronic Renal failure, a prescription by 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 is required
- In case of the last ailment Hematological disorders, a specialist having a Doctorate of Medicine degree in Hematology or any equivalent degree, is required
Thus, prescription is required by a relevant specialist in the field of Medicine. It must be noted that all the degrees should be recognized by the Medical Council of India.
Where the treatment is undertaken in government hospital, the prescription can be obtained from any specialist working full time with the hospital and having a post graduate degree in general medicine.
What the prescription should mention?
The prescription needs to be obtained from qualified doctors having relevant specialization. Earlier the prescription had to be submitted in Form 10-I, however, the same is done away with w.e.f AY 2016-17. The prescription should now specify the following:
- Name of the Patient
- Age of the Patient
- Disease or Ailment
- Name, Address, registration number of the specialist doctor issuing the prescription.
- In case the treatment is undertaken in a government hospital, the prescription should mention Name and address of the government hospital.
- The Form needs to be signed by the doctor/head of government hospital as the case may be.
The prescription so obtained has to be submitted by the assessee to the income tax department along with the Income Tax Return.
What amount can be claimed as deduction under section 80DDB?
The amount that can be claimed as deduction under section 80DDB is based on the age of the person for whom the medical expense/treatment is incurred.
In case where the medical treatment expense is incurred for an individual or his dependent or a member of HUF, the amount of deduction is capped at the actual amount paid or rupees forty thousand, whichever is less.
In case where the medical treatment expense is incurred for an individual or his dependent or a member of HUF, being a senior citizen, the amount of deduction is capped at the actual amount paid or rupees sixty thousand, whichever is less
In case where the medical treatment expense is incurred for an individual or his dependent or a member of HUF, being a very senior citizen, the amount of deduction is capped at the actual amount paid or rupees eighty thousand, whichever is less
For the purpose of this section:
- Senior citizen would mean any person, being a resident Indian, who has completed sixty years or more at any time during the relevant previous year.
- Very Senior citizen would mean any person, being a resident Indian, who has completed eighty years or more at any time during the relevant previous year.
Thus, the amount of deduction that can be claimed under Section 80DDB can be tabled as follows:
|Age of the person who is availing medical treatment||Amount of deduction (Rs.)|
|Age less than 60 years||Rs.40,000 or actual expenses, whichever is less|
|Senior Citizens- Age 60 years and above||Rs.60,000 or actual expenses, whichever is less|
|Very Senior Citizens- Age 80 years and above||Rs.80,000 or actual expenses, whichever is less|
Things to remember:
- The deduction can be claimed only in respect of actual expenses incurred during the relevant previous year.
- Further, the amount of deduction is based on the age of the person availing the medical treatment and not on the age of the assessee or the person claiming the deduction.
- The amount of deduction under Section 80DDB is exclusive of deduction claimed under any other section covered by Chapter VI A.
Thus, if an assessee incurs expense on medical treatment of specified disease or ailment of Rs. 60,000/- , then he can claim a deduction of Rs. 40,000/- under Section 80DDB. However, if the assessee has received an amount of Rs. 30,000/- from an insurance company against such expenses, then the amount of deduction that he can claim under section 80DDB stands reduced by such amount. Thus, the assessee can then claim only an amount of Rs. 10,000 /- (Rs. 40,000 less amount received from insurance company Rs. 30,000) under Section 80DDB.
Further, if the amount received from the insurance company against the expense of Rs. 60,000/- is Rs. 50,000/-, which is more than the permissible limit of Rs. 40,000/-, then the assessee would not be able claim any deduction under section 80DDB. It may further be noted that in this case if the person under taking the treatment is a senior citizen, then he can avail deduction of Rs. 10,000/- (permissible deduction under section 80DDB for Senior citizen is Rs. 60,000 less amount received from insurance company which is Rs. 50,000/-)
In a nut shell
Section 80DDB provides for deduction to Individuals and HUFs for medical expenses incurred for treatment of specified diseases or ailments and should be deducted from the Gross Total Income while computing taxable income of the assessee.