Up to Rs.40,000
The expenditure incurred for the medical treatment of self or your dependents can claim a deduction of up to Rs. 40,000 or the actual amount paid, whichever is less, under the section 80DDB. Dependent can be parents, spouse, children or siblings with completely dependent on you. For a senior citizen this exemption is Rs. 60,000, or the amount actually paid for medical expenses. The individuals who want to claim a deduction under this section need to submit a medical certificate from a doctor working in a government hospital. Diseases like Neurological, Parkinson, Malignant Cancers, AODS, Chronic Renal Failure, Hemophia, Thalassemia covered under this section. The expenses claimed by the insurance companies not considered under this section and cannot be exempted.
Section 80DDB deduction (Medical treatment expenses): Expenses done for medical treatment for self, spouse, dependent children, parents, brothers and sisters. Maximum deduction can be Rs 40,000 (goes up to 60,000 in case patient is senior citizen). Deduction is only allowed in case of following diseases:
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) Parkinson’s Disease
Malignant Cancers
Full Blown Acquired Immuno-Deficiency Syndrome (AIDS)
Chronic Renal failure
Hematological disorders :
(a) Hemophilia ;
(b) Thalassaemia.
Deductions can be claimed while filing income tax returns (as mentioned by @ca-karan-batra also). There is no need to submit proof along with ITR. If needed, IT department can ask for proof later while ITR processing.