Finance ministry may pitch for higher tax exemption on health insurance
June, 03rd 2014
The finance ministry is likely to pitch for a substantial increase in the income-tax exemption limit for health insurance as part of its plan to deepen insurance coverage. The ministry is examining a proposal that seeks to double the limit to 30,000 from 15,000.
According to a senior finance ministry official, the department of financial services had proposed a separate limit of 1.5 lakh for investment in life insurance and pension schemes. At present, all investment exemptions have a combined limit of 1 lakh.
"The view that emerged from that consultation was that there is an impending need to push health insurance and various measures including tax benefits should be examined," said an official aware of the deliberations.
According to the Insurance Regulatory and Development Authority ( IRDA), health insurance had a 22% share in non-life market in 2012-13, which declined by around 8 basis points from a year ago. The penetration of non-life insurance, which includes health insurance, has remained near constant in the range of 0.55-0.72% over the last decade.
A final decision on the issue will be taken after considering the revenue loss from the proposal.
"We have to look into it. There will be some rebate but only after wider consultations it will be decided whether the limit can be doubled or not," another official said.
The premium paid for a health insurance policy can be deducted from the total income under Section 80D of the Income-tax Act of 1961, over and above the one available under Section 80C, which is for a limit of up to 1 lakh.
For individuals who are less than 65 years, the deduction available is up to 15,000 on health policy for self, spouse and dependent children. A further deduction of 15,000 can be claimed for paying the premium for one's parents. The limit goes up to 20,000 if either parent is a senior citizen, irrespective of the dependency status. "Other slabs will also be adjusted automatically," the finance ministry official quoted earlier said.