Union Budget 2024: Will Finance Minister offer tax breaks for healthcare and health insurance sector?

Budget 2024-25: Ahead of every budget, fund allocation and tax incentives for various sectors become important topics of discussion. In the context of this year’s comprehensive budget, experts and industry insiders have stressed on the need to increase healthcare spending as a percentage of GDP. This would improve the accessibility, affordability and most importantly, the overall quality of healthcare services in India, especially in rural areas, with a special focus on preventive care, primary health care clinics and secondary care facilities.

Experts are already predicting greater spending on the health sector, including increased funding for the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), immunizations and disease control programmes.

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The Ministry of Health and Family Welfare had noted a proposed 13% increase in expenditure to Rs 87,657 crore for fiscal 2025 in the interim budget in February 2024. Moreover, the outlay for the Ayushman Bharat scheme has been increased by 10% to Rs 7,500 crore and the Finance Ministry has proposed to cover accredited social health activists (ASHAs) and anganwadi workers under the scheme.

However, experts have also called for tax breaks for the healthcare sector. In light of the COVID-19 pandemic, healthcare has become a priority. As such, tax policy may focus on encouraging more investment in healthcare facilities, medical research, and pharmaceutical production.

Besides, Section 80D of the Income Tax Act, 1961 allows individuals to claim tax deductions for health insurance premiums and certain health-related expenses. The limit for deduction under Section 80D was increased from Rs 15,000 to Rs 25,000 in Budget 2015 and has remained unchanged for the last nine years. Given that the current limit of Rs 25,000 may not adequately cover the average health insurance premium for many taxpayers across age groups, the insurance industry has been calling for an increase in the limit in Budget 2024.

AND. Life Insurance Tax Deduction: Currently, Section 80C(2)(i) of the IT Act allows taxpayers to claim tax deduction on the premium paid for life insurance policy purchased by the taxpayer for himself or his family. “However, such deduction shall not exceed 10% of the sum assured as of 1/4/2013 in the case of a normal person and 15% of the sum assured in the case of a person suffering from specified diseases under Section 80U or 80DDB of the IT Act. Further, such deduction shall also be subject to the general threshold of Rs 1,50,000. As inflation increases, insurance companies adjust their premiums to take into account higher expenses and potential future claims. In this regard, the government may consider increasing the aggregate amount of all such eligible deductions under Section 80C of the IT Act,” Surana added.

B Health insurance contribution: Section 80D of the IT Act allows individual taxpayers to claim deduction for Mediclaim contribution. The amount of such deduction is limited to Rs 25,000.

“However, in case the medical insurance premium has been paid for any senior citizen who is a member of HUF, the above mentioned amount shall be increased to Rs 50,000. It is further noted that the deduction can also be claimed in respect of medical expenses up to Rs 50,000, provided the same amount has been paid in respect of a senior citizen without health insurance. Further, the government may also increase the amount of Rs 50,000 applicable for senior citizens to Rs 75,000, keeping in mind the increasing expenditure on healthcare and treatment,” Surana said.

“Amending tax sections 80C and 80D to provide separate tax benefits for mortality risks under life plans could help bridge the mortality gap and enhance social security,” said Satishwar B., Managing Director and CEO, Bandhan Life.

“India is a price-sensitive market where consumers seek maximum value, making tax benefits a significant incentive to buy health insurance. In addition to financial protection, health insurance offers tax benefits under Section 80D, which makes it attractive from a savings perspective. The 80D tax exemption should be linked to inflation and revised from time to time. Raising the current limit of Rs 1 lakh for tax deductions would encourage more people to opt for health insurance. Currently, policyholders can claim deductions of up to Rs 25,000 for parents below 60 years and Rs 50,000 for those above 60 years. Raising these limits to Rs 50,000 and Rs 1 lakh, respectively, would further encourage elderly parents to take up health insurance. Tax exemptions should also be extended to dependent family members like siblings,” said Krishnan Ramchandran, Managing Director and CEO, Niva Bupa Health Insurance.