Wednesday, May 31, 2017

Deduction in respect of Expenditure on Medical Treatment of Specified Diseases [Section 80DDB]

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1-      Introduction to Section 80DDB
As per section 80DDB, 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:

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

2)         Deduction is available in respect of amount actually paid by the taxpayer on medical treatment of specified disease or ailment (prescribed by the Board, see rule 11DD for prescribed disease or ailment).

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

4)         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.

The tax payer has to obtain the prescription for the medical treatment from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist, as may be prescribed.

2-      Amount of deduction
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).

3-      Other points to be kept in mind
Following important points should be kept in mind while claiming deduction under section 80DDB:

1.         The taxpayer should obtain a copy of certificate (Form No. 10-I) issued by a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist, as may be prescribed, working in a Government hospital.

2.         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 2016-17, 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?
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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.