It is crucial to reintroduce the medical reimbursement with a higher limit of Rs 50,000 tax deduction
The COVID-19 pandemic has put renewed focus on the insurance protection and wealth creation plans with the categories witnessing huge demand.
The deadly virus has shown us that it is extremely crucial to have health insurance cover to meet such unforeseen medical emergencies. It is also highlighted the need to create wealth to ensure a safety net for the loved ones, to be ready for any untoward incident.
Insurance industry experts expect the upcoming union budget to have a larger focus on the insurance industry given the global focus on health and well-being.
"Our expectations are largely for the individual taxpayers, who need a tax impetus. As they are the ones who are investing their hard-earned money for a potential health condition, which sometimes might seem like an extra measure rather than an essential investment. This is prominent because family health insurance premiums versus the tax benefits are skewed," says Mayank Bathwal, CEO, Aditya Birla Health Insurance.
He urges the government to increase deduction under section 80D of the Income Tax Act against medical expenses. Currently, deduction till Rs 25,000 is allowed for the premium paid towards a health insurance policy for self, spouse, and dependent children. A deduction of Rs 25,000 for the premium paid towards a health insurance policy of parents of the assessee is also allowed.
"It becomes important to increase the limits defined for mediclaim premium tax deduction under section 80D of the Income Tax Act to Rs 1,00,000 ( Rs 50,000 for self and spouse Rs 50,000 for parents). Further allowed dependent relationships should be re-looked," Bathwal said.
"It is also crucial to reintroduce the medical reimbursement with a higher limit of Rs 50,000 tax deduction which got merged in standard deduction during the finance budget 2018.”
Similarly, Kamlesh Rao, MD, and CEO, Aditya Birla Sun Life Insurance, hopes the budget would take steps to deepen insurance penetration in the country.
"From a social security standpoint, both pension products offered by life insurers and the National Pension Scheme (NPS) are serving the same cause of building a corpus for retirement income. While investment in NPS offers additional tax deductions of Rs 50,000 under section 80CCD, life insurer’s pension plans do not enjoy this benefit, making it unattractive for customers," says Rao.
Additionally, life insurers offer annuities as retirement income, for which they generally invest the fund in government securities for a long-term guaranteed return, which also plays a significant role in nation-building.
"Government should increase the supply of long-dated (40-50 years) bonds for increased liquidity in the market. It should further develop the corporate bond market, where insurance companies can source long-term, creditworthy or enhanced corporate bonds, and generate better long-term yields for such annuity plans," adds Rao.