Budget 2024: Health insurers seek more tax incentives
This union budget, there is a demand to reduce the tax burden and rather give more tax exemptions to those who take health insurance.
After the formation of the NDA government, preparations for the union budget are in full swing. From common man to the industry, everyone is expecting concessions from the government.
Medical expense is burdening the common man more than the cost of food and drinks. If a member of your family is admitted to a renowned hospital for 4-5 days, the bill amount is likely to touch lakhs.
Normally, it is advisable to get a health insurance to reduce treatment expenses, but there are also heavy taxes imposed on it. This union budget, there is a demand to reduce the tax burden and rather give more tax exemptions to those who take health insurance.
In fact, insurance companies have demanded an increase in tax exemptions on health insurance premiums from the Modi 3.0 government. Under Section 80D of the Income Tax Act, an individual can claim a deduction of up to Rs. 25,000 on health insurance premiums. For senior citizens, this limit is Rs. 50,000.
According to media reports, experts associated with the insurance industry demand that tax exemption under Section 80D should be increased to Rs. 50,000 for individuals, i.e., those below 60 years.
Similarly, there is a demand to increase the deduction limit for senior citizens from Rs. 50,000 to Rs. 75,000. Their argument is that increasing the deduction limit on premiums will ensure sufficient coverage for the elderly, also covering increased healthcare expenses.
How tax exemptions work on health insurance?
When you pay the premium while taking health insurance, claiming it under Section 80D reduces the premium amount from your income. This reduces taxable income, resulting in lower tax liability.
Suppose your income is Rs. 8 lakh and you have paid Rs. 20,000 as health insurance premium. While claiming deduction, your taxable income will be reduced to Rs. 7.80 lakh and tax will be calculated on Rs. 7.80 lakh instead of Rs. 8 lakh.
The benefit of Section 80D is currently available under the old tax regime. Although, there has long been a demand to make it part of the new tax regime.
Meanwhile, there is also a demand to reduce GST on health insurance. According to a report by Business Standard, non-life insurance companies have reiterated their demand to reduce GST on health insurance products from 18% to 5%. Currently, health insurance attracts GST at a rate of 18%.
Reducing GST rates will help make health insurance affordable for the common man. Additionally, increasing the coverage of health insurance will encourage more people towards it.
The insurance industry hopes that the government will include life insurance products in tax exemption under the new tax regime. Under the current old tax regime, deductions of up to Rs. 1.5 lakh are claimable on life insurance premiums under Section 80C.
Whether or not the government increases the deduction limit on health insurance this budget, it’s essential to consider health insurance from a financial planning perspective. Health insurance helps reduce the burden of healthcare expenses, ensuring that you don’t have to dip into your savings and investments.