One of the issues faced by Indians is the constantly rising healthcare costs. As a result, most people find it difficult to receive quality treatment at an affordable cost in a timely manner.
Healthcare costs are rising at almost 15% per annum, which makes it difficult to meet expenses in case the need arises. In case any medical emergency arises, people would either use their savings or borrow money from friends and relatives.
To overcome the hurdles resulting from escalating healthcare costs, there were huge expectations from the Budget 2018. Some of these expectations were met and Finance Minister Arun Jaitley presented few changes in the health insurance tax benefits.
Before understanding these changes, here is a brief overview of the benefits that are currently available:
- Section 80D of the Income Tax Act allows deductions of up to INR 25,000 per annum paid as health insurance premium
- In case the insured is a senior citizen over 60 years old, the medical insurance tax exemption is INR 30,000 per year
- Annual preventive healthcare expenses of up to INR 5,000 are allowed as the tax deduction
The quantum of the benefits depends on the age of the insured. Here are different scenarios of availing medical insurance tax exemption.
- If the individual purchases health insurance on behalf of senior parents (over 60 years old), he receives tax benefits of up to INR 55,000 per year. This includes INR 25,000 for health insurance for self and INR 30,000 for insuring his senior parents.
- If an individual is over 60 years old and purchases health insurance for self and his parents, the total tax benefits are INR 60,000. This includes INR 30,000 for his health insurance policy and INR 30,000 for his parents’ plan.
- Within the maximum section 80D tax benefits of health insurance, annual preventive health checkups benefit of up to INR 5,000. This means that if a person pays INR 20,000 as the health insurance premium and spends INR 5,000 on the preventive checkup, the total benefit is INR 25,000 (which is the maximum specified by the Income Tax Act for individuals less than 60 years old).
Here are the changes announced for section 80D in the Budget 2018.
- If an individual buys a single premium health insurance policy that offers coverage for more than one year, the deduction will be proportionately distributed over the policy term. However, the tax benefits of health insurance would be within the pre-determined monetary limits.
- The tax exemption for senior citizens (over 60 years old) has been enhanced to INR 50,000 per year from the current INR 30,000 per annum exemption. The INR 50,000 limit includes health insurance premium and medical expenditure.
- The health insurance tax benefits would be available to self, spouse, parents, and children. An important change is that these benefits are still available to an individual even if the parents and children are not dependent on him.
- Medical expenditure for self, spouse, children, siblings, and dependent parents for treating critical conditions like a chronic renal failure, malignant cancer, thalassemia, and hemophilia is enhanced to INR 1 lakh for senior citizens. This limit was INR 60000 for senior citizens and INR 80,000 for very senior citizens aged over 80 years before the Budget 2018.
Government-funded healthcare program
The Center announced a government-funded healthcare program that would benefit almost 10 crore poor families. These families would receive coverage of up to INR 5 lakh per year per family towards secondary and tertiary care hospitalization. Finance Minister Arun Jaitley in his Budget speech mentioned that the government would allocate INR 52,000 crore for the healthcare sector. The government proposes to set up 24 medical colleges and hospitals through up-gradation of existing district facilities.
All the aforementioned changes will be effective from April 1, 2019. These would be applicable from the assessment year 2019 -20 and subsequent years.