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As per Indian income tax laws, individuals who are paying for the treatment of handicapped dependants can claim a tax deduction on such payments. The tax benefit is also available to HUFs for any HUF members who are handicapped dependents.
Under Section 80DD of the income tax act, depending on the level of disability, there are two types of deductions available for treatment of handicapped dependants.
If you qualify for either of the two benefits, you can deduct the entire allowed amount from your taxable income, even if your incurred expenses are less than the allowed limit.
Example 1: An individual spends ₹70,000 in a year on a dependant member with severe disability. However, the individual can claim the maximum benefit available of ₹100,000, even though the incurred expenses are less than ₹100,000.
To be eligible for the benefit, dependants should have disability in any of the following:
Dependants could be a spouse, parents, children, brothers and sisters. You can deduct medical expenses as well as expenses incurred on training and rehabilitation for handicapped dependants. You can also deduct any insurance paid to LIC or any other insurer, specifically for the treatment of such dependants. Note the benefit is not applicable to all insurance schemes, but only to certain schemes like Jeevan Aadhar and Jeevan Vishwas from LIC.
Also, the dependants should be fully dependant on the taxpayer and should not claim a disability allowance for themselves under Section 80U.
Use our tax calculator to see how section 80DD affects the tax calculations.