Deduction u/s 80DD is available to resident Individuals/ HUF, towards payment of insurance premium under a scheme for the maintenance of disabled dependent. However, there is rider which defeats the very purpose, i.e. lump sum payment or annuity is available to the disabled dependent on the death of the Individual or the member of HUF subscriber. In case of death of the disabled dependent during the lifetime of Individual/ HUF Member, total amount paid for such insurance/ annuity scheme would be deemed to be the taxable income of the such assessee in the year of receipt. Therefore this condition has been proposed to be relaxed by nullifying the deeming provision, to remove the genuine hardship of differently abled dependents. Even, it is proposed to provide the deduction in the cases where the lump sum payment or annuity is available to the disabled dependent on attaining the age of 60 by the Individual/ HUF Member where the insurance payment has been discontinued. Accordingly, IT S. 80DD is proposed to be amended to allow deduction in case of release of annuity during lifetime of parent/ guardian of a disabled dependent, vide Clause 21 of the Finance Bill 2022 (budget 2022-23):
1. The existing provision of section 80DD, inter alia, provide for a deduction to an individual or HUF, who is a resident in India, in respect of,-
(a) expenditure for the medical treatment (including nursing), training and rehabilitation of a dependent, being a person with disability; or
(b) amount paid to LIC or any other insurer or administrator or specified company in respect of a scheme for the maintenance of a disabled dependent.
2. Sub-section (2) of the aforesaid section provides that the deduction shall be allowed only if the payment of annuity or lump sum amount is made to the benefit of the dependent, in the event of the death of the individual or the member of the HUF in whose name subscription to the scheme has been made.
3. Sub-section (3) of the aforesaid section provides that if the dependent with disability, predeceases the individual or the member of the HUF, the amount deposited in such scheme shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year.
4. In the Writ Petition No. 1107 of 2017 Ravi Agrawal versus Union of India and Another, Justice A.K. Sikri observed that that there could be harsh cases where handicapped dependents may need payment of annuity or lump sum basis even during lifetime of their parents/guardians. It was further observed that the Centre may take into consideration all the aspects, including those where a disabled dependent might need payment on annuity or lump sum basis even during the lifetime of the parents or guardians.
5. Therefore, 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 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 dependent, before his death, by way of annuity or lump sum by application of the condition referred to in the proposed amendment.
6. 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. 71965