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ICICI Lombard Expert Blog

Budget May Hike Tax-free Medical Expense Cap

February 20 2015

The current tax-free medical reimbursement limit of `15,000 a year is under the government's scanner. Owing to the increasing medical costs in the country, the government is likely to raise the tax-free medical reimbursement from employers to `25,000 per year.

This review is a result of three basic reasons. First, these limits were determined years ago and need to be modified according to recent norms. Second, the cost has increased drastically over a period of time. Third, due to the rising claims, insurance companies have increased their premium.

The current limit is easily breached due to the cost incurred in both government as well as private hospitals. A realistic review will help to place a limit that is beneficial for all stakeholders.

The Bharatiya Jananta Party (BJP) government has time and again iterated that they are pro-investment and savings, and against high-taxation. With this move, the government will be encouraging people to opt for a higher cover. Individuals tend to opt for insurance cover just to claim tax deductions. However, this shouldn't take preference over purchasing the right insurance cover.

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