Union Budget 2015-16: More incentives for buying health cover

You will now be able to claim a higher deduction on your health insurance policy, with Finance Minister Arun Jaitley raising the limit to Rs 25,000 from Rs 15,000 per annum. Experts say the move is aimed to encourage people to buy a higher cover.

The Union Budget also raised the deduction limit for health insurance policy to Rs 30,000 from Rs 20,000 for senior citizens. For very senior citizens, who may not be eligible for a health cover, it is proposed to allow deduction up to Rs 30,000 per annum towards expenditure on their treatment.

Bhargav Dasgupta, managing director & CEO, ICICI Lombard, says, "Medical inflation has been rising at about 10-15% per annum. Since the treatment cost is increasing, premiums are also rising accordingly. So, a higher deduction will help people go for higher cover."

Yashish Dahiya, CEO & co-founder, PolicyBazaar.com, says, "People can now think of getting higher cover as currently on an average people spend around Rs 10,000-Rs 12,000 on health insurance premium." For example, a family of four, where an eldest member is around 35 years old, spends about Rs 12,000 per annum on an average for a family floater policy of Rs 5 lakh. The same family, thanks to the increased deduction, can now consider almost doubling their cover.

The budget also proposes that Pradhan Mantri Suraksha Bima Yojna will provide an accidental death cover of Rs 2 lakh for a premium of just Rs 12 per annum. It will be linked to the Pradhan Mantri Jan Dhan Yojana. Another social security Scheme, Pradhan Mantri Jeevan Jyoti Bima Yojana, proposes to provide a cover of Rs 2 lakh towards both natural and accidental death risk, at a premium of Rs 330 per annum for the age group 18-50.

Other deductions

The Union Budget also raised the deduction limit in case of very senior citizens under Section 80DDB from Rs 60,000 to Rs 80,000 per annum for specified diseases. The deduction limits have also been increased for people with disabilities. The limit under Section 80DD in respect of maintenance (including medical treatment of a dependant with disability) has also been raised from Rs 50,000 to Rs 75,000 per annum. In case of severe disability, it is to be increased to Rs 1.25 lakh from Rs 1 lakh per annum.

{blurb}
Similarly, under section 80U, for a person with disability, the deduction has been raised from Rs 50,000 to Rs 75,000 per annum. Homi Mistry, partner, Deloitte Haskins & Sells LLP, says, "The increase in the tax deductions for health insurance premia for various categories, including for medical treatment of dependants with specified disabilities and people with disabilities is a welcome feature in this year's Budget."

Moreover, with respect to Employees State Insurance (ESI), the employee would have the option of choosing either ESI or a health insurance product, recognised by the Insurance Regulatory Development Authority (IRDA). ESI is a health insurance scheme that covers all employees with an income of Rs 15,000 or less per month. While experts have welcomed the step, they await more clarity on the issue before commenting on it.

{blurb}