Health covers may get boost in Budget

Industry hopes Section 80D deduction will be raised

 After increasing the foreign direct investment (FDI) cap in insurance, the next step the government might take is to ensure each household in the country opts for an insurance policy.

To start with, the government is working on making health insurance policies more attractive. The budget is expected to give some tax concessions on medical insurance, an official said.

The industry expectation from the budget is that it take small steps such as removing service tax on health insurance premium, and increase the limit of deduction under section 80D. 

The deduction provides for tax deduction from the total taxable income for the medical insurance premium paid by an individual. This tax deduction is available over and above the deduction of Rs 1,50,000 under 80C.

At present, the deduction available under 80D is up to Rs 20,000 for senior citizens, and up to Rs 15,000 in other cases for insurance of self, spouse, and dependent children. “To increase penetration of medical insurance, this limit needs to be increased. Even the industry body has suggested the same,” the official said.

The Narendra Modi government at the Centre has made it clear that the growth of insurance in the country is its priority.

On Friday, the government notified the enhanced cap of 49 per cent in the insurance sector. But experts are of the opinion that increasing the cap would not help until more people are covered by insurance.

Only four health insurers

The insurance sector was opened up for the private sector in 2000, but even after 15 years, insurance penetration is still at a miniscule 4 per cent in the country, a major chunk of which is life insurance. Health insurance coverage is abysmal and there are only four health insurance firms in the country.

Tax benefits on healthcare insurance will help nurture a culture of preventive healthcare in India, according to analysts. Studies have shown that most consumers look at health insurance as a low priority option compared with other investments because of lack of awareness and lower tax exemption.

In India, about 60 per cent of total expenses incurred on treatment are borne by patients, while 90 per cent of the medical expenses are paid out by insurance companies in developed countries.

The life insurance industry had earlier recommended that the tax relief be linked to the term of the policy, instead of sum assured.