Skip to main content

Tax Breaks for Health Cover Premiums on Cards

Tax Breaks for  Health  Cover Premiums on Cards
Health insurance premiums could get larger tax breaks, as the finance ministry has asked the apex body of general insurance firms to examine the proposal for the Budget 2018-19
The government is willing to consider the demand, since health insurance costs have moved centre stage in the policy circles. The Narendra Modiled government is pushing for insurance-based healthcare. While the governments at the states and the Centre subsidised a large percentage of premium for people below the poverty line, costs spike for those above it.
Under the National Health Policy 2017, the government is planning to bring a national-level health protection scheme, a key component of which will be cheap health insurance products. There are two areas where the government could intervene through the Budget — it could cut the GST rate payable every time someone buys a health insurance product; or it could also provide a larger income tax set off for those who buy a health insurance product, provided under Section 80D of the Income Tax Act
The umbrella body of insurers, the General Insurance Council, has met the revenue department in the finance ministry to push for inclusion of both options in the Budget 2018-19. Finance Minister Arun Jaitley will read the Budget in the Lok Sabha on February 1.
Sources close to the Council said the ministry appeared more keen towards the option of income tax set off. Under the current law, anyone who buys a medical insurance policy can get a tax waiver of up to Rs 50,000 per year. The tax benefit covers parents, self, spouse or dependent children.
One of the sources said the Finance ministry has asked the Council to clarify if there is any profit element to the insured, if the insurance cover is raised. “Among various types of products (indemnity as well as benefit), the key question we have to answer is if there is any element of profit to the policyholder for these health insurance claims,” said the source.
The government wants to ensure that there is no room for anyone to abuse the policies like those which offer cash support for the days a patient is hospitalised or provide a lump sum payment.The government has reasons to be careful as there have been cases reported by the third party administrators where some of the elements of the medical cover were used by hospitals and patients to soak up on insurance.
Consequently, the finance ministry and the insurance regulator want to ensure that just like tax deduction would be available for the premium paid when buying an insurance policy, there should be modalities to tax any income or profit made by the policy holder at the point of claim payout. KK Srinivasan, former member (non-life) at insurance regulator Irda, however, said: “If the government is moving away from universal healthcare to insurance-based healthcare, then there should be no tax on the premium paid.”
A CRISIL estimate shows health insurance accounts for 24 per cent of the gross premium of all the general insurance companies, just after motor, for financial year 2016-17.Among the private sector companies, the percentage is smaller at 12 per cent of the gross premium. Because of the perceived high claims ratio in group health insurance, private sector companies have been reluctant to enter the field.
The Business Standard, New Delhi, 8th January 2018

Comments

Popular posts from this blog

At 18%, GST Rate to be Less Taxing for Most Goods

About 70% of all goods and some consumer durables likely to cost less

A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.

India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.

For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment.

Going by this formulation, about 70% of all goods could fall in the 18% bracket.

The GST Council has finalised a four-tier tax structure of 5%, 12%, 18% and 28% but has left room for the highest slab to be pegged at 40%. A committee of officials will work out the fitment and the council…

Firms with sales below Rs.50 crore out of ambit

The tax department has reiterated that the PoEM rules, which require foreign firms to pay taxes in India if the effective control is here, will not apply to companies withaturnover of Rs.50 crore or less inafinancial year. Last month, the tax department had come out with the longawaited Place of Effective Management (PoEM) rules, which require foreign companies in India and Indian firms with overseas subsidiaries to pay local taxes if their businesses are effectively controlled by Indians. Then the rules did not setathreshold above which they were to apply. However, the accompanying press release states that the rules will not apply to companies withaturnover of up to Rs.50 crore inayear. That created confusion whether the threshold will be adhered to. Inacircular to clarify things, the Central Board of Direct Taxes (CBDT) said the provision "shall not apply toacompany havingaturnover or gross receipts of ~50 crore or less inafinancial year".

PoEM rules essentially target shell …