Taxation - DT Ch 09: Deductions - Test 3: answer key

Question 1 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. Smt. Anuradha Sen, aged 48 years, is a resident individual employed as a finance director at Vikramaditya Tech Labs Pvt. Ltd. She has exercised the option to shift out of the default tax regime for Tax Year 2026-27. Her spouse is aged 51 years, and their two children are financially dependent on her. During the year, Anuradha paid ₹18,000 through net banking towards a health insurance policy covering herself, her spouse and dependent children. She also contributed ₹4,000 to the Central Government Health Scheme through electronic transfer. In September 2026, she spent ₹4,000 in cash on preventive health check-ups for herself and her spouse. Her father, aged 69 years, is financially independent and has a separate health insurance policy. Anuradha paid his annual insurance premium of ₹44,000 through a bank transfer. Her mother, aged 67 years, does not have any health insurance policy. Anuradha incurred ₹16,000 on her mother's medical treatment during December 2026 and paid the amount through UPI. She also incurred ₹2,000 in cash towards her mother's preventive health check-up. All insurance policies satisfy the applicable statutory conditions. The medical expenditure incurred on her mother is not covered by any insurer or reimbursed by any employer. Both parents are resident individuals. The payments were made during Tax Year 2026-27. Anuradha has maintained the required receipts and payment records. She wants to compute the deduction under section 80D by separately considering the limits applicable to herself and her family, on one hand, and her parents, on the other. She also wants to understand whether dependency of parents and cash payment for preventive health check-ups affect the deduction.

Compute the deduction allowable to Anuradha under section 80D for insurance premium, CGHS contribution and preventive health check-up expenditure relating to herself, her spouse and dependent children. Assume that all payments otherwise satisfy the statutory conditions. Consider the aggregate ceiling applicable to this family category and the special allowance for preventive health check-ups.

1. ₹25,000 (correct answer)
2. ₹26,000
3. ₹22,000
4. ₹20,000

Answer: A — ₹25,000

Explanation. The eligible amounts are insurance premium ₹18,000, CGHS contribution ₹4,000 and preventive check-up ₹4,000. Their aggregate is ₹26,000. Anuradha and her spouse are below 60 years, so the applicable family ceiling is ₹25,000. The amount available for preventive check-up after insurance and CGHS is ₹25,000 − ₹18,000 − ₹4,000 = ₹3,000. Therefore, allowable deduction = ₹18,000 + ₹4,000 + ₹3,000 = ₹25,000.

Where it goes wrong. Allowing the entire check-up expenditure in addition to the ₹25,000 ceiling rather than including it within that ceiling.

Authority. Section 80D(2)(a) and 80D(2)(b), Income-tax Act, 1961; corresponding section 126, Income-tax Act, 2025.

Question 2 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Determine the deduction available to Anuradha for expenditure and insurance premium relating to her parents. Her father is a senior citizen with a separate insurance policy, while her mother is a senior citizen without insurance and has incurred medical expenditure. Anuradha also paid for her mother's preventive health check-up. The father is financially independent. What amount is deductible under the parents' category?

1. ₹44,000
2. ₹50,000 (correct answer)
3. ₹62,000
4. ₹16,000

Answer: B — ₹50,000

Explanation. Father's eligible insurance premium is ₹44,000. Mother's eligible medical expenditure is ₹16,000 because she is a senior citizen without health insurance. Mother's preventive check-up of ₹2,000 is also within the permitted mode of payment. Aggregate = ₹44,000 + ₹16,000 + ₹2,000 = ₹62,000. The enhanced ceiling for senior citizen parents is ₹50,000. Consequently, deduction is restricted to ₹50,000. Father's financial independence does not affect eligibility for his premium.

Where it goes wrong. Disallowing the father's premium because he is not dependent, or allowing the entire ₹62,000 without applying the parents' separate ceiling.

Authority. Section 80D(2)(c) and 80D(2)(d), Income-tax Act, 1961; corresponding section 126, Income-tax Act, 2025.

Question 3 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Taking both categories of health-related payments into account, determine Anuradha's total deduction under section 80D for Tax Year 2026-27. Apply the separate limit for herself and her family and the separate limit for her parents. Do not combine the actual expenditure amounts without first applying the statutory ceilings.

1. ₹50,000
2. ₹62,000
3. ₹75,000 (correct answer)
4. ₹1,00,000

Answer: C — ₹75,000

Explanation. The deduction relating to Anuradha's own family is ₹25,000, as computed after restricting the aggregate of premium, CGHS and preventive check-up payments. The deduction relating to her parents is ₹50,000, being the separate senior citizen ceiling. Therefore, total section 80D deduction = ₹25,000 + ₹50,000 = ₹75,000. The two categories have independent limits and are added only after applying their respective restrictions.

Where it goes wrong. Applying a single ₹50,000 ceiling to the entire family, including parents, instead of applying the two separate limits.

Authority. Section 80D, Income-tax Act, 1961; corresponding section 126, Income-tax Act, 2025.

Question 4 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Anuradha paid certain amounts in cash during the year. Consider separately her insurance premium, CGHS contribution, preventive health check-up and her mother's medical expenditure. Which statement correctly identifies the payment for which cash is an acceptable mode under section 80D? Assume that the other statutory requirements are fulfilled.

1. Cash insurance premium and cash check-up both qualify
2. Cash medical expenditure and cash CGHS both qualify
3. All four types of cash payment qualify
4. Only preventive check-up expenditure paid in cash qualifies (correct answer)

Answer: D — Only preventive check-up expenditure paid in cash qualifies

Explanation. Section 80D permits payment by any mode for preventive health check-ups, including cash. Other payments qualifying under the provision, including health insurance premium, CGHS contribution and medical expenditure, must be made otherwise than in cash. Thus, Anuradha's cash expenditure on preventive check-ups can qualify subject to the ₹5,000 aggregate preventive check-up ceiling and the applicable category ceiling. Cash payments of premium or medical expenditure do not qualify.

Where it goes wrong. Extending the cash-payment relaxation for preventive health check-ups to insurance premium and medical expenditure.

Authority. Section 80D(2), Income-tax Act, 1961; section 126(7), Income-tax Act, 2025.

Question 5 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. Mr. Ajay Malhotra, a resident individual aged 56 years, has opted for the optional tax regime for Tax Year 2026-27. His spouse, Meenal, is aged 62 years, and they have two dependent children. On 1 July 2026, Ajay paid ₹1,20,000 through net banking towards a health insurance policy covering himself, Meenal and their children. The policy has a coverage period of three consecutive years, beginning on 1 July 2026 and ending on 30 June 2029. The premium is a single lump-sum payment and no further premium is payable during the coverage period. Ajay also spent ₹4,000 in cash on preventive health check-ups for himself and his family during the tax year. Ajay's father, aged 79 years, has a separate health insurance policy. Ajay paid an annual premium of ₹38,000 for this policy through a debit card. His mother, aged 74 years, does not have any health insurance policy. During February 2027, Ajay incurred ₹26,000 towards her medical treatment and paid the amount through UPI. He additionally spent ₹2,000 in cash on her preventive health check-up. Neither parent is covered by the family policy. The father's insurance premium is paid otherwise than in cash, and the mother's medical expenditure is not reimbursed by any employer or insurer. Both parents are senior citizens. All payments relate to Tax Year 2026-27 and the policies satisfy the applicable insurance conditions. Ajay seeks to calculate the deduction by applying the appropriate fraction to the multi-year insurance payment, considering the enhanced ceiling applicable because his spouse is a senior citizen, and independently applying the ceiling for senior citizen parents.

Ajay paid ₹1,20,000 in one lump sum on 1 July 2026 for a three-year health insurance policy covering himself, his senior citizen spouse and their dependent children. Determine the amount attributable to Tax Year 2026-27 before applying the annual section 80D ceiling. The entire payment was made otherwise than in cash.

1. ₹40,000 (correct answer)
2. ₹60,000
3. ₹1,20,000
4. ₹30,000

Answer: A — ₹40,000

Explanation. Where a lump sum health insurance premium is paid for a policy covering more than one year, deduction is spread equally over the relevant tax years. Relevant period = 3 years. Appropriate fraction = 1/3. Annual deduction attributable to Tax Year 2026-27 = ₹1,20,000 × 1/3 = ₹40,000. This is the amount considered for the current tax year before applying the annual section 80D ceiling. The full lump sum cannot be claimed in the payment year.

Where it goes wrong. Claiming the entire multi-year insurance payment in the first year instead of spreading it over the policy period.

Authority. Section 80D(4A), Income-tax Act, 1961; section 126(8)(b), Income-tax Act, 2025.

Question 6 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Ajay's spouse is aged 62 years, although Ajay himself is only 56. For Tax Year 2026-27, the annual fraction of the multi-year premium is ₹40,000 and preventive health check-up expenditure is ₹4,000, paid in cash. Determine the allowable deduction for Ajay's own family category after applying the relevant ceiling.

1. ₹40,000
2. ₹44,000 (correct answer)
3. ₹50,000
4. ₹25,000

Answer: B — ₹44,000

Explanation. The applicable ceiling increases to ₹50,000 where the individual or spouse is a senior citizen. Ajay's spouse is 62 years old and therefore satisfies this condition. Annual premium fraction = ₹40,000. Preventive check-up = ₹4,000. Aggregate = ₹40,000 + ₹4,000 = ₹44,000. This amount is below the enhanced ₹50,000 limit. Therefore, the entire ₹44,000 is deductible.

Where it goes wrong. Applying the ₹25,000 ceiling merely because the taxpayer himself is below 60 years of age.

Authority. Section 80D(2)(a), Income-tax Act, 1961; section 126(1), (5) and (8)(b), Income-tax Act, 2025.

Question 7 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Compute Ajay's deduction for insurance premium and medical expenditure relating to his parents. His father is a senior citizen covered by a policy for which Ajay paid ₹38,000 through a debit card. His mother is a senior citizen without health insurance, and Ajay incurred ₹26,000 on her treatment through UPI. A further ₹2,000 was paid in cash for her preventive health check-up.

1. ₹38,000
2. ₹64,000
3. ₹50,000 (correct answer)
4. ₹66,000

Answer: C — ₹50,000

Explanation. The father's insurance premium of ₹38,000 qualifies. Mother's medical expenditure of ₹26,000 also qualifies because she is a senior citizen without health insurance. Her preventive check-up of ₹2,000 is eligible and is within the aggregate preventive check-up allowance. Total = ₹38,000 + ₹26,000 + ₹2,000 = ₹66,000. Since either or both parents are senior citizens, the maximum parents' category deduction is ₹50,000. Hence deduction is ₹50,000.

Where it goes wrong. Adding the parents' category expenditure without applying its separate ₹50,000 ceiling.

Authority. Section 80D(2)(c) and 80D(2)(d), Income-tax Act, 1961; corresponding section 126, Income-tax Act, 2025.

Question 8 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Calculate Ajay's total section 80D deduction for Tax Year 2026-27. His own family category includes a multi-year insurance premium fraction and preventive check-up expenditure, while the parents' category includes insurance premium and eligible medical expenditure. Apply the relevant limits independently and consider the aggregate preventive health check-up restriction.

1. ₹75,000
2. ₹90,000
3. ₹1,00,000
4. ₹94,000 (correct answer)

Answer: D — ₹94,000

Explanation. The own-family category permits ₹44,000: ₹40,000 annual fraction plus ₹4,000 preventive check-up. The parents' category permits ₹50,000 after restricting its aggregate expenditure of ₹66,000. The total preventive check-up deduction is ₹4,000, below the overall ₹5,000 limit. Thus total deduction = ₹44,000 + ₹50,000 = ₹94,000. The separate category ceilings are applied before aggregation.

Where it goes wrong. Applying the senior citizen parent's limit to the entire section 80D claim or deducting the full three-year premium in the first year.

Authority. Section 80D, Income-tax Act, 1961; corresponding section 126, Income-tax Act, 2025.

Question 9 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. Mr. Kunal Batra, aged 44 years, is a resident individual carrying on a consultancy business. He has exercised the option to shift out of the default tax regime for Tax Year 2026-27. His daughter Rhea, aged 20 years, is wholly dependent on him for her support and maintenance. Rhea has a disability assessed at 72% by the competent medical authority. During the year, Kunal incurred ₹42,000 towards her medical treatment, nursing, training and rehabilitation. He also deposited ₹80,000 under a scheme of an approved insurer for her maintenance. The scheme provides for payment of an annuity or lump sum to Rhea on Kunal's death or after he attains 60 years of age and discontinues contributions. Rhea has been nominated to receive the benefit. Her disability certificate is valid until 31 March 2027 and specifies that reassessment is required thereafter. Kunal's brother, aged 29 years, has a disability of 85% and is mainly dependent on Kunal for maintenance. However, his brother independently claims a deduction under section 80U while computing his own total income for Tax Year 2026-27. Kunal has also been certified by a competent medical authority as having a disability of 84%. His disability certificate is valid for the current tax year and does not require reassessment during that year. Kunal proposes to claim deductions both for his daughter's disability and for his own disability. He has not claimed any other deduction under these provisions. The prescribed medical certificates and supporting documents are available. He wants to determine whether his brother can be treated as a dependent for section 80DD, whether the amount actually spent limits his daughter's deduction, and the implications of the different disability percentages and certificate validity periods.

Determine Kunal's deduction under section 80DD in respect of his daughter Rhea. She has a certified disability of 72%, is wholly dependent on him and is the beneficiary under an approved maintenance scheme. Kunal incurred ₹42,000 on medical treatment, nursing, training and rehabilitation and deposited ₹80,000 under the scheme. What deduction is allowable for Tax Year 2026-27?

1. ₹42,000
2. ₹80,000
3. ₹1,25,000
4. ₹75,000 (correct answer)

Answer: D — ₹75,000

Explanation. Rhea is Kunal's dependent daughter and has a certified disability below the severe disability threshold. Section 80DD provides a fixed deduction of ₹75,000 for a dependent person with disability. The deduction is not computed as a percentage of medical expenditure or scheme contributions. Although Kunal incurred ₹42,000 and deposited ₹80,000, the amount allowable under section 80DD is ₹75,000. The qualifying disability certificate and other statutory conditions are satisfied.

Where it goes wrong. Restricting the flat section 80DD deduction to the amount of actual medical expenditure or the amount deposited under the scheme.

Authority. Section 80DD, Income-tax Act, 1961; corresponding section 127, Income-tax Act, 2025; Rule 11A, Income-tax Rules, 1962.

Question 10 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Kunal's brother has a disability of 85% and is mainly dependent on Kunal for his support and maintenance. However, the brother independently claims a deduction under section 80U while computing his own total income for Tax Year 2026-27. Can Kunal claim an additional deduction under section 80DD in respect of this brother?

1. ₹1,25,000, because disability exceeds 80%
2. Nil, because the brother claims section 80U (correct answer)
3. ₹75,000, because the brother is mainly dependent
4. ₹50,000, because both persons claim separate deductions

Answer: B — Nil, because the brother claims section 80U

Explanation. Although a brother can fall within the statutory definition of a dependent, section 80DD excludes a dependent who has claimed deduction under section 80U in computing his own total income for the same tax year. Kunal's brother claims section 80U. Consequently, he cannot be treated as an eligible dependent for Kunal's section 80DD claim. The allowable deduction for this brother is nil, irrespective of his 85% disability.

Where it goes wrong. Considering financial dependency and disability percentage alone while overlooking the statutory exclusion relating to the dependent's own section 80U claim.

Authority. Section 80DD(4), Income-tax Act, 1961; corresponding section 127(6), Income-tax Act, 2025.

Question 11 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Kunal himself has been certified by a competent medical authority as having a disability of 84%. He is resident in India, has exercised the option to shift out of the default tax regime and possesses the prescribed medical certificate. Determine his deduction under section 80U for Tax Year 2026-27.

1. ₹75,000
2. ₹80,000
3. ₹1,25,000 (correct answer)
4. ₹50,000

Answer: C — ₹1,25,000

Explanation. Section 80U allows a resident individual with a certified disability to claim a fixed deduction. The normal deduction is ₹75,000, whereas the deduction for severe disability is ₹1,25,000. Kunal's certified disability is 84%, exceeding the severe disability threshold. Therefore, his allowable deduction is ₹1,25,000. The deduction is fixed and is not calculated by reference to the medical expenditure incurred or the level of gross total income.

Where it goes wrong. Applying the ordinary disability deduction of ₹75,000 despite the assessee having a certified severe disability.

Authority. Section 80U, Income-tax Act, 1961; corresponding section 154, Income-tax Act, 2025; Rule 11A, Income-tax Rules, 1962.

Question 12 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Rhea's medical certificate specifies that reassessment of her disability is required after 31 March 2027. Kunal wishes to continue claiming the deduction under section 80DD for the succeeding tax year. Which compliance step is necessary for continuing the claim after expiry of the original certificate?

1. Continue the old certificate indefinitely
2. Obtain a new certificate only if expenditure increases
3. Obtain a certificate from the employer
4. Obtain a fresh medical certificate after the specified reassessment period (correct answer)

Answer: D — Obtain a fresh medical certificate after the specified reassessment period

Explanation. Where the medical certificate specifies that the disability condition requires reassessment, the assessee must obtain a fresh certificate from the medical authority after expiry of the period stated in the original certificate. Kunal's daughter's existing certificate is valid up to 31 March 2027. For claiming the deduction in a subsequent year, he must obtain the fresh certificate after the specified reassessment period and furnish it in the prescribed manner with the return.

Where it goes wrong. Assuming that an existing disability certificate remains sufficient for every subsequent tax year even where reassessment is specifically required.

Authority. Section 80DD(4), Income-tax Act, 1961; corresponding section 127(4)(c), Income-tax Act, 2025; Rule 11A, Income-tax Rules, 1962.

Question 13 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Ms. Riddhi, aged 45 years, paid ₹22,000 through electronic banking towards a health insurance policy covering herself, her spouse and dependent children. She incurred ₹3,500 in cash towards their preventive health check-ups. Her mother, aged 68 years, has no health insurance, and Riddhi paid ₹42,000 through UPI towards her medical treatment. A further ₹2,000 was spent in cash on her mother's preventive check-up. Riddhi has opted for the optional tax regime. Compute her total deduction under section 80D.

1. ₹69,000 (correct answer)
2. ₹67,000
3. ₹75,000
4. ₹50,000

Answer: A — ₹69,000

Explanation. The self-family category comprises ₹22,000 premium and ₹3,500 check-up, totalling ₹25,500. Its ceiling is ₹25,000, so deduction is ₹25,000. For her senior citizen mother, medical expenditure of ₹42,000 and preventive check-up of ₹2,000 qualify because she has no insurance. Parents' category deduction is ₹44,000. Total = ₹25,000 + ₹44,000 = ₹69,000. Preventive check-up allowance used is ₹5,000, within its aggregate ceiling.

Where it goes wrong. Applying the parents' enhanced ceiling to the family category or overlooking the aggregate preventive health check-up restriction.

Authority. Section 80D(2), Income-tax Act, 1961; corresponding section 126, Income-tax Act, 2025.

Question 14 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Pranav, aged 61 years, pays a lump-sum health insurance premium of ₹1,80,000 on 1 April 2026 for a three-year policy covering himself and his spouse. The premium is paid through a bank transfer and the policy remains in force for three consecutive tax years. He has no other insurance premium or medical expenditure qualifying under section 80D. Determine his deduction for Tax Year 2026-27 after considering the statutory annual apportionment and his senior citizen status.

1. ₹60,000
2. ₹50,000 (correct answer)
3. ₹25,000
4. ₹1,80,000

Answer: B — ₹50,000

Explanation. A three-year single-premium policy requires apportionment over three relevant tax years. Annual premium fraction = ₹1,80,000 ÷ 3 = ₹60,000. Since Pranav is a senior citizen, the applicable annual section 80D ceiling for self and family is ₹50,000. Hence deduction = lower of ₹60,000 and ₹50,000 = ₹50,000. The full lump sum is not deductible in the payment year.

Where it goes wrong. Claiming the full premium in one year or forgetting that the senior citizen ceiling still applies after the annual fraction is calculated.

Authority. Section 80D(4A), Income-tax Act, 1961; section 126(8)(b), Income-tax Act, 2025.

Question 15 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Vikram, aged 42 years, pays ₹28,000 through net banking towards a health insurance policy covering his father, aged 70 years. His father is financially independent and does not depend on Vikram for maintenance. Vikram also spends ₹18,000 through cheque towards medical treatment of his mother, aged 68 years, who has no health insurance. Neither payment is reimbursed. Assuming the policy otherwise satisfies section 80D, determine the allowable deduction for the parents' category.

1. ₹28,000
2. ₹18,000
3. ₹46,000 (correct answer)
4. ₹50,000

Answer: C — ₹46,000

Explanation. Health insurance premium paid for parents qualifies whether or not they are financially dependent. The father's premium of ₹28,000 is therefore eligible. Medical expenditure of ₹18,000 on the uninsured senior citizen mother is also eligible. The combined amount is ₹28,000 + ₹18,000 = ₹46,000. This is below the enhanced parents' category limit of ₹50,000. Therefore, the entire ₹46,000 is deductible.

Where it goes wrong. Disallowing the father's premium because he is financially independent, or overlooking that uninsured senior citizen parents' medical expenditure qualifies.

Authority. Section 80D(2)(c) and 80D(2)(d), Income-tax Act, 1961; corresponding section 126, Income-tax Act, 2025.

Question 16 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Saurabh, aged 59 years, pays ₹14,000 towards his own medical insurance through banking channels. His spouse, aged 62 years, is not insured, and Saurabh incurs ₹58,000 on her medical treatment through UPI. His father, aged 67 years, is insured under a policy for which Saurabh pays ₹40,000, while his mother, aged 64 years, is uninsured and incurs medical expenses of ₹22,000 paid by cheque. Compute the total deduction under section 80D.

1. ₹75,000
2. ₹90,000
3. ₹50,000
4. ₹1,00,000 (correct answer)

Answer: D — ₹1,00,000

Explanation. The spouse is a senior citizen and has no insurance, so her medical expenditure qualifies. The self-family aggregate is ₹14,000 + ₹58,000 = ₹72,000, restricted to ₹50,000. The parents' aggregate is ₹40,000 + ₹22,000 = ₹62,000, restricted to ₹50,000 because both parents are senior citizens. Total deduction = ₹50,000 + ₹50,000 = ₹1,00,000. Both category ceilings are independent.

Where it goes wrong. Applying the ₹50,000 ceiling to all covered persons together rather than separately to the self-family and parents' categories.

Authority. Section 80D(2)(a) to (d), Income-tax Act, 1961; corresponding section 126, Income-tax Act, 2025.

Question 17 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mrs. Neha, aged 39 years, pays ₹20,000 as medical insurance premium for herself, her spouse and children and ₹25,000 as premium for her senior citizen parents. She also spends ₹3,500 in cash on preventive check-ups for herself and her family and ₹3,500 on preventive check-ups for her parents. Both premium payments are made electronically and the policies satisfy statutory conditions. Determine the total section 80D deduction after applying the specific category ceilings and the aggregate limit for preventive check-ups.

1. ₹50,000 (correct answer)
2. ₹45,000
3. ₹48,500
4. ₹55,000

Answer: A — ₹50,000

Explanation. Self-family premium is ₹20,000, while parents' premium is ₹25,000. Check-up expenditure totals ₹3,500 + ₹3,500 = ₹7,000. The aggregate preventive health check-up allowance is restricted to ₹5,000. Allocating the eligible ₹5,000 within the respective category limits, total deduction = ₹20,000 + ₹25,000 + ₹5,000 = ₹50,000. Both category ceilings have sufficient unused capacity to accommodate the permitted check-up expenditure.

Where it goes wrong. Allowing ₹7,000 for preventive check-ups because the payments fall under two categories, despite the aggregate ₹5,000 restriction.

Authority. Section 80D(2), Income-tax Act, 1961; corresponding section 126(1), (2) and (5), Income-tax Act, 2025.

Question 18 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Ramesh, aged 45 years, pays ₹15,000 in cash towards a medical insurance policy covering himself and his spouse. He also spends ₹4,500 in cash on preventive health check-ups for both of them. There are no other payments under section 80D during Tax Year 2026-27. Ramesh has opted out of the default tax regime. What deduction can he claim in respect of these two cash payments?

1. ₹19,500
2. ₹4,500 (correct answer)
3. ₹15,000
4. Nil

Answer: B — ₹4,500

Explanation. Section 80D requires health insurance premiums to be paid otherwise than in cash. The insurance premium of ₹15,000 paid in cash is therefore ineligible. Preventive health check-up expenditure is permitted by any mode, including cash, subject to the ₹5,000 aggregate limit and the applicable category ceiling. Thus ₹4,500 qualifies. Total deduction from the two cash payments = nil + ₹4,500 = ₹4,500.

Where it goes wrong. Disallowing cash preventive health check-up expenditure along with cash insurance premium, although the statute provides a specific payment-mode exception.

Authority. Section 80D(2) and 80D(5), Income-tax Act, 1961; section 126(5), Income-tax Act, 2025.

Question 19 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Harish, a resident individual, incurs ₹1,40,000 towards maintenance and medical treatment of his wholly dependent grandfather, who has a disability of 85%. He obtains the prescribed medical certificate and exercises the option to shift out of the default tax regime. He wishes to claim deduction under section 80DD. Determine the amount allowable, considering both the definition of dependent and the severity of disability.

1. ₹1,25,000
2. ₹75,000
3. Nil (correct answer)
4. ₹1,40,000

Answer: C — Nil

Explanation. Section 80DD covers specified dependants of an individual, namely spouse, children, parents, brothers and sisters who are wholly or mainly dependent on the individual. A grandfather is not included in this statutory definition. Therefore, even though Harish incurred ₹1,40,000 and his grandfather has severe disability, no deduction is permissible. The amount deductible under section 80DD is nil.

Where it goes wrong. Assuming that every relative who is financially dependent qualifies for section 80DD.

Authority. Section 80DD(1) and 80DD(2), Income-tax Act, 1961; corresponding section 127(1) and 127(6), Income-tax Act, 2025.

Question 20 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Dev, a resident individual, maintains and provides medical care for his wholly dependent daughter, who has a disability assessed at 80% by the competent medical authority. Dev incurs ₹35,000 on her medical treatment and training during Tax Year 2026-27. She has not claimed a deduction under section 80U. Dev satisfies the medical certificate and other conditions under section 80DD. What is his allowable deduction?

1. ₹35,000
2. ₹75,000
3. ₹1,00,000
4. ₹1,25,000 (correct answer)

Answer: D — ₹1,25,000

Explanation. Section 80DD allows a fixed deduction of ₹1,25,000 for a dependent with severe disability. The severe disability threshold is 80% or more. Dev's daughter has disability of precisely 80%, so she satisfies the severe disability criterion. The actual medical expenditure of ₹35,000 does not reduce the fixed deduction provided by section 80DD. Hence the deduction allowable is ₹1,25,000, subject to the prescribed certificate and other conditions.

Where it goes wrong. Reading the severe disability threshold as requiring more than 80%, or restricting the deduction to actual medical expenditure.

Authority. Section 80DD(1) and 80DD(2), Income-tax Act, 1961; corresponding section 127(3), Income-tax Act, 2025; Rule 11A, Income-tax Rules, 1962.

Question 21 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Smt. Kavita, a resident individual, maintains her wholly dependent son who has a certified disability of 60%. During Tax Year 2026-27, she spends only ₹18,000 on his medical treatment, nursing and rehabilitation. The son has not claimed section 80U deduction and Kavita has furnished the prescribed medical certificate. She has exercised the option to shift out of the default tax regime. What is the deduction available under section 80DD?

1. ₹75,000 (correct answer)
2. ₹18,000
3. ₹60,000
4. ₹1,25,000

Answer: A — ₹75,000

Explanation. A dependent son with a certified disability qualifies under section 80DD where the other conditions are fulfilled. The normal fixed deduction is ₹75,000 for a person with disability who does not meet the severe disability threshold. The expenditure actually incurred is ₹18,000, but the deduction under section 80DD is fixed and is not restricted to this amount. Thus the allowable deduction is ₹75,000.

Where it goes wrong. Confusing the fixed deduction under section 80DD with deductions calculated by reference to actual expenditure.

Authority. Section 80DD(1) and 80DD(2), Income-tax Act, 1961; corresponding section 127, Income-tax Act, 2025.

Question 22 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Rahul, a resident individual, has a disability certified at 86% by a competent medical authority. His certificate is in the prescribed form and the disability condition does not require reassessment during Tax Year 2026-27. Rahul has exercised the option to shift out of the default tax regime and has furnished the certificate with his return. Determine his deduction under section 80U for the year.

1. ₹75,000
2. ₹1,25,000 (correct answer)
3. ₹1,00,000
4. ₹50,000

Answer: B — ₹1,25,000

Explanation. Section 80U provides a deduction of ₹75,000 for an individual with disability and ₹1,25,000 for an individual with severe disability. Rahul has certified disability of 86%, which falls within the severe disability category. His residence status, certification and optional-regime conditions are satisfied. Therefore, deduction allowable = ₹1,25,000. The deduction is fixed and does not depend on the amount actually incurred on medical treatment.

Where it goes wrong. Claiming only ₹75,000 despite the individual's certified severe disability.

Authority. Section 80U(1), Income-tax Act, 1961; corresponding section 154, Income-tax Act, 2025; Rule 11A, Income-tax Rules, 1962.

Question 23 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A resident individual maintains his wholly dependent spouse, who has a certified disability of 90%. The spouse independently claims a deduction under section 80U while computing her own total income for Tax Year 2026-27. The individual also incurs ₹2,00,000 towards her maintenance and treatment and has obtained the prescribed certificate. Determine whether he can claim section 80DD deduction in respect of the same spouse.

1. ₹1,25,000
2. ₹75,000
3. Nil (correct answer)
4. ₹2,00,000

Answer: C — Nil

Explanation. Section 80DD excludes a dependent who has claimed deduction under section 80U in computing that dependent's own total income for the same tax year. The spouse independently claims section 80U. Accordingly, the assessee cannot claim section 80DD in respect of her, even though she is wholly dependent, has 90% disability and the assessee incurred ₹2,00,000. The allowable deduction under section 80DD is nil.

Where it goes wrong. Allowing separate 80DD and 80U deductions in respect of the same disabled person for the same tax year.

Authority. Section 80DD(4), Income-tax Act, 1961; corresponding section 127(6), Income-tax Act, 2025.

Question 24 · 2 marks · Taxation - DT Ch 09: Deductions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Mohit, a resident individual, deposits ₹90,000 with an insurer under a scheme for maintenance of his dependent disabled son. The son has not claimed section 80U. The scheme provides payment of an annuity after Mohit's death, but Mohit has not nominated his son, another person or a trust to receive the payment for his son's benefit. Mohit claims deduction under section 80DD for the deposit. Which conclusion is correct regarding the scheme-related claim?

1. The entire deposit qualifies without any nomination
2. ₹75,000 qualifies because nomination is optional
3. ₹1,25,000 qualifies because the son is dependent
4. The scheme-related claim fails because the required nomination is absent (correct answer)

Answer: D — The scheme-related claim fails because the required nomination is absent

Explanation. For a deposit under the specified maintenance scheme, section 80DD requires the scheme to provide for an annuity or lump sum for the disabled dependent on the assessee's death or upon attaining 60 years of age with discontinuance of deposits. The assessee must also nominate the dependent, another person or a trust to receive payments for the dependent's benefit. Mohit has made no nomination. Therefore, the scheme-related claim fails despite the existence of an otherwise qualifying dependent and insurer scheme.

Where it goes wrong. Treating nomination as a procedural formality rather than a statutory condition for a scheme-based section 80DD deduction.

Authority. Section 80DD(2), Income-tax Act, 1961; corresponding section 127(4)(a), Income-tax Act, 2025.

Question 25 · 2 marks · Taxation - DT Ch 09: Deductions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A resident Hindu Undivided Family has a Karta who suffers from a certified disability of 90%. The HUF proposes to claim a deduction of ₹1,25,000 under section 80U while computing its total income for Tax Year 2026-27. The Karta has furnished his prescribed medical certificate and the HUF has exercised the option to shift out of the default tax regime. Is the HUF eligible to claim this deduction?

1. Nil, because section 80U is available only to a resident individual (correct answer)
2. ₹75,000, because the Karta has an ordinary disability certificate
3. ₹1,25,000, because the Karta has severe disability
4. ₹50,000, because the deduction is restricted for an HUF

Answer: A — Nil, because section 80U is available only to a resident individual

Explanation. Section 80U grants deduction to a resident individual who is certified as a person with disability. It does not provide a deduction to an HUF merely because its Karta suffers from disability. The eligible assessee must itself be an individual satisfying the statutory conditions. Therefore, the HUF cannot claim the deduction of ₹1,25,000, and its allowable section 80U deduction is nil.

Where it goes wrong. Treating the disability of an HUF's Karta as though the HUF itself were an eligible individual assessee.

Authority. Section 80U(1), Income-tax Act, 1961; corresponding section 154, Income-tax Act, 2025.