Section 80D of the Income Tax Act of 1961 allows tax exemption on income taxes for health insurance premiums and specific health expenses. Premiums for health insurance are tax-free as high as Rs.25,000 in the case of persons less than 60 years old and Rs 50,000 for people over that. You may claim exemption of premiums paid to the children of your dependent spouse, and parents. The rules permit payments up to Rs.5000 for health checks that prevent illness to be tax-free.
This is a fantastic tax incentive because it encourages health insurance and preventive healthcare. According to the government’s statistics, over 70% of healthcare is paid for by savings from personal savings. This is a lot and savings for individuals ought to be considered the only option to pay for healthcare costs, once insurance is fully utilized. The government should set two goals in the section 80D. In order to encourage people to purchase health insurance, and also to make them purchase the appropriate amount of amount guaranteed. In order to achieve this, the tax exemptions for income under section 80D must be increased, in the ideal case, doubled.
Tax exemptions currently in place are not a reason to purchase adequate health insurance. Below is a table taken from SecureNow’s database of medical insurance products on the market, shows this.
At a minimum, all the city’s tax payers must have at least Rs 10 lakh in health insurance. In actual fact I’d say If one is taking the long-term view that the coverage must be at least 20 lakh for each person. If you have a health insurance coverage of 10 lakhs today tax-free, it does not usually pay for current premiums. The amount of the uncovered difference rises with age and is highest for seniors. There is the option of purchasing an insurance policy with a lower amount that is Rs 5 lakh, within the exclusion limit. However this Rs 5 lakh policies are also the ones where the rent caps for rooms as well as other limits are the most restricting. In addition, a Rs 5 lakh insurance policy is not enough even when multiple family members are admitted to hospitals. It was common in the course of the pandemic with many families becoming sick all at once.
The pandemic served as an occasion to call for increased the amount of sum assured. The majority of families experienced a dramatic rise in health costs due to the fact that multiple members of the family were sick. hospital expenses increased due to limitations in capacity and the need for massive PPEs. The typical hospital stay is now 3 days up to one week or more for patients suffering from covid. For many of our clients, we witnessed at least a 50% increase in healthcare expenses in the course of covid. Due to the frequency with which new strains of covid are emerging, we need to increase the health insurance coverage to meet the rising cost.
The government has granted up to 5,000 rupees of the exemption amount to be used for preventative health checks. I’m all in favor of annual health checks to catch health problems early. But, as exempt limits already are very low and unintentionally, the result is that taxpayers who utilize the preventive health check expense to obtain the exemption provided under Section 80D are entitled to significantly less of the exemption limit available in health insurance. Both are essential and a greater limit could help solve this issue.
In the eyes of the government, the government should try to make sure that taxpayers purchase at least Rs 10 lakh worth of money currently. Medical inflation is the main cause of this. As per the official’s BRICS Joint Statistics 2021, the Consumer Price Index (CPI) for health has increased around 6percent per year in the last few years. The CPI in urban areas will definitely be more expensive. If I examine our own database with over thousand claims, the medical inflation is more prevalent in the 10 to 15 area. The increase is due to increased hospital rates and patients who upgrade their rooms, and a steady increase in the cost of treatment. The majority of those hospitalized during the outbreak were unable to pay for their treatment because prices for rooms increased above those of the General Insurance Council (GIC) suggested rates. Because insurers were compensated according to GIC’s guidelines and hospitals charged according to market conditions, people who had insurance paid the difference. A larger sum assured, without room limitations would eliminate these problems later on in future.Health insurance, and the sum assured you purchase today is intended to protect you against medical emergencies throughout your life. A few years ago, IRDAI, the regulator for insurance IRDAI launched the amazing lifelong renewal feature that is available in health insurance for individuals. This means that the insurance that you purchase now will be able to pay for the majority of your medical emergency costs up to three decades from now. To calculate this amount guaranteed, the present costs have be added up at the anticipated rate of medical inflation.
In the example above, putting in an stent is currently priced approximately 2.5 up to five lakhs at an excellent tertiary hospital. For a 35-year-old, it is possible to require the same stent in 20 years and the cost could be between 20 and 30 lakhs. Even if the insurance offers a substantial no-claim reward, it’s going to be a significant shortfall of the expense of treatment when it is really needed. This is why greater sum assureds are promoted by tax policy in the present. Another tax policy change that could immediately boost the number of people who take health insurance is to reduce the GST tax rate from 18% to 10% or 5 percent. This will have a direct effect on insurance premiums overall and makes the purchase considerably less expensive.
