Section 80DDB Of Income Tax Act

Introduction

The Indian tax system is progressive and slab-based. It means that income and tax rates increase proportionately. The total taxable income of a financial year helps to decide the tax slab. However, the income earned is not necessarily taxable. 

The Income Tax Act of 1961 regulates income and its taxability for various entities. It is comprehensive legislation covering all income aspects, tax instances, deductions and exemptions. Deductions under Chapter VI-A have various subsections that cover the deductions available against taxable income.   
 

Introduction to Section 80DDB

Chapter VIA includes some sub-sections for medical expenses of the individual or dependents. From these, Section 80D and Section 80DDB are standard and used frequently. Section 80D covers payment for medical insurance, whereas Section 80DDB focuses on medical expenses incurred for specific diseases or ailments. 

What is the 80ddb deduction of the Income Tax Act?

Medical diseases are often stressful and involve huge medical expenditures. Therefore, the Income Tax Act provides tax relief through deductions for specific impairments. As per Section 80DDB, an individual or a HUF can claim expenses incurred to treat a specified disease or ailment as a deduction from taxable income. The subsection also covers the conditions and maximum permissible deduction. 

Section 80DDB allows deduction of the expenditure incurred for self, spouse, children, parents and siblings on treating specified diseases. Rule 11DD of Income Tax covers the list of specific diseases. 

A taxpayer can claim the benefit of Section 80DDB at the time of ITR filing. However, the section requires medical proof of the disease and treatment. Section 80DDB requires taxpayers to submit a prescription from experts or specialists in the medical field. The contents of the prescription must be in a specified format to claim the deduction. Form 10-I provides the format and relevant details. The form must contain the following details.

●    Name and age of the patient 
●    Name of disease or medical condition
●    Name, address, qualification and registration number of the medical expert
●    If the treatment is in a government hospital, then the name and address of the hospital and a signature from the head doctor. 

While the taxpayer need not submit the form along with the Income Tax Return, retaining a copy for future reference is helpful. Find below an extract of the form prescribed by the income tax department. 
 

Deduction Under Section 80DDB

Gross Total Income refers to the total taxable income from all income sources. It includes salary income, income from business or profession, income from house property, capital gain and income from other sources. A taxpayer can reduce the deduction under Section 80DDB from the Gross Total Income to calculate the Net Total Income. The income tax slab and tax liability are a factor of the Net Total Income. 

Who Can Claim the Deduction under Section 80DDB

Individuals and Hindu Undivided Families (HUF) can claim a deduction under section 80DDB. Additionally, the individual or HUF must be a resident Indian in the previous financial year to claim the deduction. Non-resident Indians, corporates or any other entity cannot claim deduction under section 80DDB.

Also, the deduction is available only upon payment of actual medical expenses. A taxpayer cannot claim benefit under Section 80DDB on the occurrence of a medical ailment without any expense payment. .  

Whose Medical treatment can be Allowed as a Deduction Under Section 80DDB? 

The following taxpayers can claim a deduction under section 80DDB for the expenses incurred on the medical treatment of a specified disease.

●    Resident individual – They can claim expenses for themselves or their dependents. Dependents include spouses, children, parents or siblings. For an insured dependent, the taxpayer must deduct the amount paid by an insurer or reimburse an employer from the deduction. 

●    Hindu Undivided Family (HUF) – An HUF can claim a deduction for any family member

What Kind of Medical Treatments are Allowed Under Section 80DDB

Section 80DDB applies to medical expenses incurred to treat specified diseases or ailments. The objective of this is to include major medical illnesses and diseases. 

Rule 11DD mentions a list of diseases and ailments along with specific details for applicability of Section 80DDB.

These include the following.

1.    Malignant Cancer 
2.    Acquired Immuno-Deficiency Syndrome 
3.    Chronic Renal failure 
4.    Haematological Disorders such as Hemophilia or Thalassaemia. 
5.    Neurological diseases include Motor Neuron Disease, Aphasia, Parkinson's Disease, Ataxia, Dementia, Dystonia, Musculorum Deformans, Chorea, and Hemiballismus. A specialist must identify a disability level of at least 40% or more. 
 

What documents are required & How do claim deduction u/s 80DDB?

The taxpayer must submit proof for the requirement and execution of treatment mentioned in Rule 11DD to claim a deduction under section 80DDB. Therefore, a prescription for such treatments from a specialist or a qualified doctor is mandatory.

Initially, obtaining such prescriptions from a government hospital's doctors was mandatory. However, in the assessment year 2016-17, the government relaxed the prescription requirement. As per the updated Rule 11DD, a taxpayer can obtain a prescription even from the relevant specialist at private hospitals. A prescription from a doctor at a government hospital is not mandatory. 

Rule 11DD now states that the taxpayer can obtain a prescription as follows:

1.    Neurological diseases
A Neurologist with a Doctorate of Medicine in Neurology or an equivalent degree can provide a prescription along with the disability level. 

2.    Malignant Cancer
An oncologist with a Doctorate of Medicine in oncology or an equivalent degree can prescribe a Malignant Cancer. 

3.    AIDS
For Acquired Immuno-Deficiency Syndrome (AIDS), any specialist with a postgraduate degree in general or internal medicine must provide a prescription.

4.    Chronic Renal Failure 
A Nephrologist with a Doctorate of Medicine degree in Nephrology or a Urologist with a Master of Chirurgiae degree in Urology or any equivalent degree must certify the illness. 

5.    Haematological Disorders 
A specialist with a Doctorate of Medicine degree in Haematology or any equivalent degree can prescribe for haematological disorders. 

Thus, the subsection in conjugation with the Rule requires a prescription from a relevant specialist in the field of medicine. The Medical Council of India must recognise each degree for a valid prescription.

Lastly, suppose that the taxpayer undertakes the treatment at a government hospital. In that case, any specialist working full-time with the hospital with a postgraduate degree in general medicine can provide the prescription. 
 

What Should be Mentioned in the Prescription?

The taxpayer must obtain the prescription from the specified experts based on the type of ailment. Earlier, Form 10-I was necessary for the prescription. However, from the assessment year 2016-17, Form 10-I is not mandatory. 

Now, the prescription from the specialist must include the following – 
●    Name and age of the Patient
●    Disease or Ailment
●    Name, address, and registration number of the specialist doctor who issues the prescription.
●    If the treatment is in a government hospital, the prescription must include the name and address of the government hospital. The doctor or the head of the government hospital must sign the prescription.

The taxpayer must submit the prescription obtained to the income tax department and the Income Tax Return.
 

What amount Can be Claimed as a Deduction Under Section 80DDB

The patient’s age determines the deduction amount under section 80DDB. The taxpayer may differ from the person whose medical expense or treatment is underway. 

Suppose the medical treatment expense is for an individual, dependents or a member of HUF. In that case, the minimum deduction limit is the rupees forty thousand. However, the amount increases for senior and very senior citizens. 

For this section, senior citizen refers to any person who is a resident Indian who attains sixty years or older during the previous year. A senior citizen is any resident Indian individual who completes eighty years or more at any time during the relevant financial year.

Thus, the deduction amount under Section 80DDB is as below:

Things to remember: 

a.    Deduction under Section 80DDB is only for actual expenses incurred during the relevant previous year.
b.    Deduction under Section 80DDB excludes any deduction claimed under another section included in Chapter VIA.
c.    The age of the person availing of medical treatment is important for the deduction, not the taxpayer's age.
 

Adjust the Amount of Deduction with Any Reimbursement

A taxpayer must adjust the amount received from the insurer for a health insurance policy or reimbursement from the employer from the total deduction amount under Section 80DDB. 

For example, Mr Singh, aged 45, incurs an expenditure of Rs. 75,000 to treat cancer. The maximum deduction he can claim under Section 80DDB is Rs. 40,000. Suppose Mr Singh receives Rs. 15,000 against such an expense from an insurance company. The deduction amount will reduce to that extent. Therefore, Mr Singh can only claim the balance amount under Section 80DDB of Rs. 25,000, i.e., Rs. 40,000 less the amount received from the insurance company Rs. 15,000. 

Suppose the amount received from the insurance company is Rs. 55,000. The amount received is more than the permissible limit of Rs. 40,000. Thus, Mr Singh cannot claim any deduction under section 80DDB. However, if Mr Singh is 62, he is a senior citizen. The overall deduction limit increases to Rs. 1,00,000. Hence, the amount received from the insurance company of Rs. 50,000 is lower than the maximum limit for the deduction. Therefore, Mr Singh can claim the balance deduction of Rs. 20,000 for additional expenses, i.e., Rs. 75,000 less the amount received from the insurance company Rs. 55,000. 

To summarize, the deduction amount cannot increase the expense incurred or reimbursement from an insurance company or employer. 

Section 80DDB Form Format

Section 80DDB allows deduction by an individual for expenses incurred to treat certain specified medical diseases or ailments for self or dependents. The section also provides a prescribed form format for the same. 

How to Fill Section 80DDB Form

Follow the steps mentioned below to fill out the form under section 80DDB.

1.    Enter the applicant's name, address, and father's name. 
2.    Add the name and address of the dependent and the relationship with the applicant.
3.    Thoroughly review Rule 11DD and enter details accordingly. For neurological ailments, specify whether the disability is 40% or more for diseases and ailments.
4.    Mention details of the specialist who issues the certificate or prescription. Details include the specialist's name, address, registration number and qualification. Also, add the name and address of the government hospital if applicable. 
5.    Please fill out the verification section, duly sign it and confirm that the information provided is accurate. 
 

Section 80DDB for Senior citizen

Initially, the maximum deduction limit under section 80DDB for senior citizens and very was Rs. 60,000 and Rs. 80,000, respectively. The limit applied to individuals and HUFs. However, in Budget 2018, the government put forth a proposal to increase the deduction limit. 

Amendments Made in Section 80DDB in AY 2018-19

In the assessment year 2018-2019, the then Finance Minister, Arun Jaitley, proposed to offer a major relief and increase the maximum deduction limit for medical treatment of specified diseases for senior and very senior citizens. Therefore, senior and super senior citizens can potentially avail of a maximum deduction under section 80DDB of Rs. 1,00,000.