Circular No. 775

775 dated 26 3 1999

What this is

Circular No. 775 was issued by the Central Board of Direct Taxes on 26 March 1999. Its subject is 775 dated 26 3 1999.

What it does

Tells drawing and disbursing officers to stop demanding medical bills for the section 80DD deduction. For computing tax deductible from salary, it is enough that the employee furnishes a medical certificate from a Government hospital, a written declaration signed by the claimant certifying the actual expenditure on medical treatment including nursing, training and rehabilitation of the handicapped dependant, and the receipt or acknowledgement for any amount paid or deposited in the specified schemes of the Life Insurance Corporation or the Unit Trust of India. Section 80DD, as substituted for sections 80DD and 80DDA by the Finance (No. 2) Act, 1998, caps the deduction at Rs. 40,000 in the aggregate in the hands of the parent or guardian. The clarification applies to deduction at source from salaries under section 192 for the financial year 1998-99 and onwards.

Why it was issued

The Board had learnt that some drawing and disbursing officers were insisting on medical vouchers and bills in addition to the Government hospital certificate of permanent physical disability or mental retardation.

Who it reaches

Salaried employees with a handicapped dependant claiming section 80DD
Drawing and disbursing officers computing salary TDS
Employers processing employee declarations for section 192

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.80DD	s.127
s.192	s.392, s.402

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

516. Whether it would be sufficient if the employee furnishes a medical certificate from a Government Hospital and a declaration in writing duly signed by the claimant certifying the actual amount of expenditure on account of medical treatment (including nursing) training and rehabilitation of the handicapped dependent and receipt/acknowledgement for the amount paid or deposited in the specified schemes of LIC or UTI
1. Section 80DD, substituted for sections 80DD and 80DDA by the Finance (No. 2) Act, 1998, lays down that the deduction on account of expenditure incurred by way of medical treatment (including nursing), training and rehabilitation of a handicapped dependant or amount paid or deposited in specified schemes of Life Insurance Corporation or Unit Trust of India for the maintenance of handicapped dependant, shall be limited to Rs. 40,000 in the aggregate while computing the total income of the parent or the guardian of such handicapped dependant.
2. It has come to the notice of the Board that some of the DDOs are asking the employees to submit medical vouchers/bills in connection with the expenses incurred on the medical treatment of their handicapped dependant apart from a certificate from the Government hospital regarding the permanent physical disability or mental retardation of the handicapped dependant.
3. It is clarified that it would be sufficient if the employee furnishes a medical certificate from a Government hospital and a declaration in writing duly signed by the claimant certifying the actual amount of expenditure on account of medical treatment (including nursing) training and rehabilitation of the handicapped dependant and receipt/acknowledgement for the amount paid or deposited in the specified schemes of LIC or UTI. Therefore, DDOs may not insist upon production of vouchers/bills by the employees for having incurred expenditure on medical treatment of their handicapped dependants for allowing the deduction under section 80DD for the purpose of computing tax deductible at source.
4. This clarification is applicable for the purpose of Tax Deduction at Source from salaries under section 192 of Income-tax Act, 1961 during the Financial year 1998-99 and onwards.

Circular : No. 775, dated 26-3-1999.

What to watch

The relaxation is expressly for the purpose of tax deduction at source under section 192; it does not by its terms govern what an Assessing Officer may call for in assessment.
The Government hospital certificate is still required, and so is the receipt for any deposit in an LIC or UTI scheme; only bills and vouchers are dispensed with.
The Rs. 40,000 aggregate ceiling stated here is the figure as section 80DD stood after the Finance (No. 2) Act, 1998; the section has since been recast in terms this text does not carry.
It is worded to run for the financial year 1998-99 and onwards, not for that year alone.

Where you meet it

When an employer disallows a section 80DD claim at the payroll stage for want of bills, and in a short-deduction proceeding under section 201 questioning the deduction allowed in Form No. 16.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 3/2022 — Specifying forms returns statements reports orders by whatever name called prescribed in appendix ii to be furnished ele 16 July 2022
Notification No. 177 — It (Eighteenth Amdt.) Rules, 2005 29 June 2005
Circular No. 702 — 515. Whether, as long as conditions mentioned in section 80DD are fulfilled and assessee has incurred any expenditure o 3 April 1995
Circular No. 654 — Financial Year 1993-94 22 July 1993
Circular No. 653 — Section 80DD l Medical Treatment of Handicapped Dependents, ETC 15 June 1993
Notification No. 02 /2023 — Procedure format and standards for filling an application for grant of certificate under sub rule 4 and its proviso of r 27 September 2023

← Circular No. 776 · Circular No. 774 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.