- Date : 27/01/2022
- Read: 3 mins
In India, health insurance feels like an added expense, and hence penetration of non-life insurance stands at as low as 1 per cent. This, despite the pandemic. To encourage more and more people to invest in health insurance, income tax exemptions under Section 80D should be increased in Budget 2022.
The pandemic has made people realise how uncertain life can be, and many have understood the importance of having health insurance. COVID-19 treatments are costly in private hospitals, and those without health insurance have been caught off-guard, shelling out a lot of money to meet medical expenses.
A lesson we've learned over the past two years is that without preventive health check-ups and proper care, leading a healthy lifestyle is impossible.
While those working in the corporate sector are provided health insurance by their employers, business owners, freelancers, and gig workers often don't avail of this benefit. When they invest in health insurance, the tax exemptions they enjoy are not sufficient, which acts as a roadblock in the broad adoption of health insurance plans.
Tax deduction under section 80D is significantly less, which is why people think of buying health insurance as an additional expense. Currently, you can claim up to ₹25,000 for health insurance premium if you are under 60 and ₹50,000 if above that.
According to government statistics, 70 per cent of health care expenses are paid from personal savings. That number is high, and one way to bring it down is to provide individuals with enough incentive to purchase health insurance. Here's why increasing tax exemptions for health insurance plans then is the need of the hour.
Promote insurance buying
According to the Insurance Regulatory and Development Authority of India's (IRDAI) annual report of 2020-21, insurance penetration in the country is 4.20 per cent, with life insurance penetration at 3.20 per cent and non-life at 1 per cent. Health insurance comes under non-life insurance, which means the numbers are even more dismal.
If this has to change, the government should provide tax deductions over the current tax slabs. The ever-increasing cases of the omicron variant have reiterated the need for health insurance.
Promoting insurance buying is likely to decrease the government's expenditures. When more people have insurance plans, they rely on the insurance providers for all expenses and are likely to turn to private medical institutions for treatment. With this, the government can concentrate on providing better treatment to the underprivileged.
Also Read: Check which insurance to buy
Provide relief on expenses
As the pandemic continues unabated, health insurance plan premiums are getting costlier. By 2021, there was an average increase of 25 to 35 per cent in premiums.
With an increase in exemption limit, the government can provide little relief to the public. Currently, income tax exemptions up to ₹25,000 are permitted for individuals and dependents, and another ₹ 25,000 can be claimed for deduction if you pay premiums for your parents too. All these amounts appear meagre, keeping in mind the cost of premiums.
Decrease GST on premiums
GST has been a critical player in keeping people away from insurance plans. Whatever your insurance premium amount, you have to pay 18 per cent GST on it. This heavy tax payment burdens individual buyers who cannot claim back GST. With high-priced insurance plans and premiums, GST adds to the expenses of the common man, and that's why many insurance providers are urging the government to decrease GST rates.
A reduction in GST rates and an increase in tax slabs and exemption limits will work wonders for the domestic insurance industry and the public.
All eyes are now on Budget 2022. Health comes first, and the country does not need any more reminders of that.
Also Read: Changing health insurance trends post-covid