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Insurance Article

Should Limits for Health Insurance be Increased in This Budget?

January 05 2017
Health Insurance in Budget

Tax exemption limit for health insurance should increase in the budget to increase insurance penetration

Health insurance penetration in India is low. Over 80% of the population is not insured against healthcare expenditure. Healthcare costs are largely met from out-of-pocket expenses. Government-sponsored health insurance schemes account for most of those having health insurance cover.

Less than 2% of the population has health insurance cover purchased from health insurance companies. There is very low awareness about the need for health insurance. Most consider health insurance as unnecessary. This results in a very small percentage of the population buying health insurance from insurance companies.

Factors That Make Health Insurance a Necessity

Health insurance needs a massive push, particularly from the government. It is in the government’s interest that health insurance penetration increases. The factors that make health insurance essential are:

  • Rising healthcare costs
  • Increasing indebtedness due to medical emergencies
  • Rising threat of non-communicable diseases
  • Growing incidence of illnesses from acute pollution in the metros
  • Increasing burden on the government’s healthcare system

Most of those with a health insurance in India are under the government-sponsored health insurance plans for the poor or low-income groups. To promote healthcare insurance among the middle class and the upper middle class, the government needs to further incentivise its purchase. The government can do so by raising the tax saving limits on purchase of health insurance.

Need to Increase Tax Exemption Limit

Under Section 80D, an individual is currently allowed to deduct ₹25,000, paid as health insurance premium, from gross total income to reduce the tax outgo. The limit is for a health insurance policy for an individual as well as for self and family. The limit increases to ₹30,000 if the taxpayer is a senior citizen. The taxpayer is also allowed to claim deduction for health insurance premium paid up to ₹30,000 for senior citizen or very senior citizen parents (80 years and above).

The limits on deductions for tax purposes should be increased so that those who are already insured go in for higher sum insured to take care of healthcare inflation and incentivise those who do not have health insurance to protect themselves from unforeseen medical expenses.

Also increased exemption limits could prod individuals to pay higher premiums and have cover for the normally excluded expenses such as outpatient expenses, immunisations, pre-existing diseases, dental treatment and several other illnesses.

Any upward revision of the current tax exemption limit in the budget will be a welcome move for all taxpayers. Besides, it will allow the government to ensure that a significant population comes under the ambit of health insurance.

Related Article:

Lesser Known Facts About Tax Benefits of Health Insurance
Section 80D De-jargoned

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