Finance Bill 2022 changes Eligibility Criteria for Section 80DD Benefits: All you need to know

The Finance Bill 2022 has changed the Eligibility Criteria for Section 80DD Benefits.

Existing Provision

Eligibility of Claim Deduction under Section 80DD

To be eligible for the claim deduction under section 80DD, one must Be an Individual or be a part of a Hindu undivided family, who is a resident in India. This deduction is not available to non-resident Indians (NRI), since a lot of countries such as Canada, largely help their residents when it comes to medical treatment.

Expenses that are Deducted for Income Tax Calculation

The expenses that are exempted for income tax under section 80DD are any expenses incurred for a medical treatment which includes nursing, training as well as rehabilitation of dependent that is disabled, and the amount paid towards Life Insurance Corporation (LIC), Unit Trust of India or any of the other insurers for the sole purpose of buying specified schemes or insurance policies to help in the maintenance of a dependant with disabilities.

Judicial Precedent

In the Writ Petition No. 1107 of 2017, Ravi Agrawal versus Union of India and Another, Justice A.K. Sikri observed that there could be harsh cases where handicapped dependents may need payment of annuity or lump sum basis even during the lifetime of their parents/guardians. It was further observed that the Centre may take into consideration all the aspects, including those where a disabled dependant might need payment on an annuity or lump sum basis even during the lifetime of the parents or guardians.

Provision Proposed Under finance Bill 2022

In order to remove this genuine hardship, it is proposed to allow the deduction under the said section also during the lifetime, i.e., upon attaining the age of sixty years or more of the individual or the member of the HUF in whose name subscription to the scheme has been made and where payment or deposit has been discontinued. Further, it is proposed that the provisions of sub-section (3) shall not apply to the amount received by the dependant, before his death, by way of annuity or lump sum by application of the condition referred to in the proposed amendment.

This amendment will take effect from 1st April, 2023, and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.

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