Medical insurance premiums could get more tax breaks, as the finance ministry has asked for suggestions from General Insurance Council.
The government is planning to offer more exemption, as health insurance costs have moved centre stage in the policy circles. The Central government is pushing for insurance-based healthcare. While the governments at the states and the Centre subsidised a large percentage of premium for people below the poverty line, the cost for common people is increasing continuously.
Under the National Health Policy 2017, the government is planning to bring a national-level health protection scheme, a key component of which will be cheap health insurance products. There are two areas where the government could intervene through the Budget — it could cut the GST rate payable every time someone buys a health insurance product; or it could also provide a larger income tax set off for those who buy a health insurance product, provided under Section 80D of the Income Tax Act.
Under the current law, anyone who buys a medical insurance policy can get a tax waiver of up to Rs. 50,000 per year. The tax benefit covers parents, self, spouse or dependent children.
The Finance ministry has asked the Council to clarify if there is any profit element to the insured, if the insurance cover is raised. The government wants to ensure that there is no room for anyone to abuse the policies like those which offer cash support for the days a patient is hospitalised or provide a lump sum payment.
The government is moving cautiously as there have been cases reported by the third party administrators where some of the elements of the medical cover were used by hospitals and patients to soak up on insurance. Consequently, the finance ministry and the insurance regulator want to ensure that just like tax deduction would be available for the premium paid when buying an insurance policy, there should be modalities to tax any income or profit made by the policyholder at the point of claim payout. KK Srinivasan, former member (non-life) at insurance regulator Irda, however, said: “If the government is moving away from universal healthcare to insurance-based healthcare, then there should be no tax on the premium paid.”
