“INCOME TAX : EXPENSES TOWARDS SPECIFIED MEDICAL TREATMENT IS DEDUCTIBLE”

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Query 1]

I had recently undergone a surgery and have incurred an amount of Rs. 2.15 Lacs on that. Additionally, now I have to incur the monthly expenditure of Rs. 8,500/- on the regular medicines. My income source consists of Interest income from my FDR & als pension income. The FD is done by me out of my earlier saving and also out of the funds remitted to me by my son from service abroad. Can I claim the one time medical expenses as well as monthly expenses on medicines as deduction from my income? Please guide & elaborate. [V.D. Sontakke, Gondia]

Opinion:

There are two provisions (Section 80DDB & Section 80U) which can grant you some benefit under the Income Tax Act-1961. Depending upon the facts of your individual case, you need to ascertain whether the surgery expenses & subsequent monthly expenses are covered by this provision or not.

  1. Deduction u/s 80DDB:
    The deduction u/s 80DDB is available if the expenses for the medical treatment of specified disease or ailment is incurred by assessee on himself or on dependant. The specified disease for the purpose of section 80DDB is prescribed in Rule 11DD as under:
    11DD. (1) For the purposes of section 80DDB, the following shall be the eligible diseases or ailments :
    (i) Neurological Diseases where the disability level has been certified to be of 40% and above,—
    (a) Dementia ;
    (b) Dystonia Musculorum Deformans ;
    (c) Motor Neuron Disease ;
    (d) Ataxia ;
    (e) Chorea ;
    (f) Hemiballismus ;
    (g) Aphasia ;
    (h) Parkinsons Disease ;
    (ii) Malignant Cancers;
    (iii) Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;
    (iv) Chronic Renal failure;
    (v) Hematological disorders :
    (i) Hemophilia ;
    (ii) Thalassaemia.
    The amount of deduction allowable under section 80DDB is the expenditure actually incurred or Rs. 40,000/- (Rs. 60,000/- for senior citizen) whichever is lower.
  2. Deduction u/s 80U:
    Deduction under section 80U of the I.T. Act, 1961 is available to an individual who is resident and who at any time during the previous year is certified by a medical authority to be a person with disability. If you ar suffering from disability, you can claim deduction u/s 80U.
    “Person with Disability” means a person suffering from not less than 40% of any of the disability given below:
    i) blindness
    ii) low vision
    iii) leprosy-cured
    iv) hearing impairment
    v) locomotor disability
    vi) mental retardation
    vii) mental illness
    viii) austim
    ix) cerebral palsy
    x) multiple disability referred to in clauses (a), (c), & (h) of section 2 of the National Trust for welfare of persons with Austim Cerebral Palsy, Mental Retardation & Multiple Disabilities Act-1999.
    The deduction under this Section is a sum of Rs 50,000/- in normal cases and if the person is suffering from a severe disability (80% or more) then a sum of Rs. 1,00,000/- is allowable as deductions.

 

Query 2]

I am an accountant and also rendering a return filing services. And have few doubts. I would be thankful if you can advise. Whether person doing business in wholesale and have turnover less than Rs. 1 Crore can opt for presumptive taxation provision & can offer the income for taxation @ 8% without maintaining the books of accounts? Whether the same provision would be applicable for the beauty parlour & catering service provider? Is it applicable to contractor only?  [*****mudey@gmail.com]

Opinion:
  1. A scheme of presumptive taxation u/s 44AD is applicable to an Individual, HUF & a resident partnership firm (excluding LLP), engaged in any business (whether retail or wholesale or manufacturing)
  2. The assessee covered by presumptive taxation under section 44AD are not required to maintain the books of accounts provided that they offer 8% or more of their gross receipts or total turnover as income. If assessee wish to offer the income lower than 8%, then they would be required to maintain the regular books of accounts and would also required to get his books of accounts audited u/s 44AB.
  3. A person engaged in a profession cannot offer income for taxation on presumptive basis. (i.e., only assessees engaged in businesses are covered in the scheme of presumptive taxations. Professionals like Architect, Doctor, Advocate etc are not covered by presumptive taxation scheme u/s 44AD).
  4. A person earning income in the nature of commission or brokerage is also not covered for taxation on presumptive basis under section 44AD.
  5. And A person carrying on Agency businesses are also outside the purview of presumptive taxation under section 44AD.
  6. Also A person who is in the business of plying, hiring or leasing goods carriage is also excluded from the purview of section 44AD. However, such person can opt for presumptive taxation u/s 44AE.
  7. Only those assessees, whose turnover is not exceeding Rs. 1 Cr, are covered by presumptive taxation u/s 44AD. If the turnover exceeds Rs. 1 Cr, the income could not be offered for taxation on presumptive basis.
  8. Assessee claiming deductions U/s 10A, 10AA, 10B, 10BA, 80HH to 80RRB are not entitled to opt for taxation on presumptive basis u/s 44AD.

Assessee engaged in the business of beauty parlor & catering services can offer income on presumptive basis u/s 44AD. The scheme of presumptive taxation is now not restricted to retail trade only. Even manufacturer & contractors are also covered by the scheme of presumptive taxation u/s 44AD.


 

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