Ways in Which Budget 2018 Can Benefit Health Insurance Policy Holders
This year, the Union Budget focused on providing reforms under the social security and health care
sector. The government allocated substantial funds for the National Social Assistance Program that will
help in providing comprehensive social security to all sections of the society. The government also
proposed the National Health Protection Scheme under which the government would provide a cover of up to ₹5 lakh per family per year. This coverage will be for secondary and tertiary care hospitalization.
The National Health Protection Scheme is expected to cover 10 crore families and is being described as
the world’s largest government-funded health care program.
There was good news for health insurance policyholders in the form of increased income tax benefits
under Section 80D of the Income Tax Act, which offers a tax deduction for the payment made towards
premium of the health insurance policy. Here is how the new changes under Section 80D will affect the
health insurance policyholders.
Exemptions under Section 80D Prior to Budget 2018
Earlier, the income tax deduction available under Section 80D was limited to ₹25,000 a year for health
insurance policy premiums paid for self, spouse and children. Further, an individual could claim an
additional ₹25,000 for a premium paid on a health insurance policy for parents. The amount went up to
₹30,000, if the parents are senior citizens i.e. above the age of 60 years.
New Limit under Section 80D
As per the changes proposed in Union Budget 2018, the deduction available under Section 80D for
senior citizens have now increased from ₹ 30,000 to ₹50,000. This deduction is available in respect to: -
Payments towards annual premium on a health insurance policy for a senior citizen, or
Preventive health check-up of a senior citizen, or
For medical expenses incurred in respect of every senior citizen over the age of 80 years
So, if an individual is paying health insurance policy premiums for his/her senior citizen parents, he/she
can avail a total deduction of up to ₹75,000 (₹25,000 + ₹50,000) under the Section 80D. Earlier, an
an individual could claim a maximum deduction of up to ₹55,000 under Section 80D.
Union Budget 2018 also proposed changes in deduction available on a premium paid for health insurance
policies that provide cover for more than one year. Earlier, an individual could claim a deduction of up to
₹25,000 in such instances. However, as per the change in rules, if an individual opts for a health
insurance policy which keeps him/her covered for more than one year, and pays the premium upfront,
he/she is allowed to claim deduction on a proportional basis for the number of years for which the
health insurance policy is active, subject to the limit specified.
For example, if an individual purchases a health insurance policy and pays ₹40,000 for the two-year
cover, he/she can claim ₹20,000 in both years. Earlier, an individual could only claim ₹25, 000, the limit
specified under Section 80D.
These changes will help the policyholder save even more tax, and will be applicable from the assessment
year 2019-20. Most important of all, it would provide the masses an added incentive to invest in health
insurance which may not be mandated by law, but is crucial nonetheless to help an individual bear the
expenses of medical emergencies without putting a strain on his/her finances.
**To understand exactly about the policy coverage, exclusions, etc read the Policy Wordings carefully.**