The deduction limits for health insurance premiums have remained stagnant, failing to keep up with the rising costs of medical care. Increasing these limits to ₹50,000 for individuals and ₹1,00,000 for senior citizens would provide meaningful financial relief. Senior citizens, who often face higher medical expenses, would particularly benefit from this revision
Anand Roy, MD & CEO, Star Heath and Allied Insurance
Key Expectations
As the Union Budget 2025 approaches, the health insurance sector eagerly awaits transformative policy reforms to make insurance more accessible, affordable, and inclusive for all Indians. Health insurance plays a critical role in protecting individuals and families from the burden of rising medical expenses.
The FY26 budget presents a unique opportunity to fortify this safety net and advance the vision of a healthier India.
To ensure broader coverage and affordability the Finance Ministry should consider the following key measures:
Higher Deduction Limits for Health Insurance
The deduction limits for health insurance premiums have remained stagnant, failing to keep up with the rising costs of medical care. Increasing these limits to ₹50,000 for individuals and ₹1,00,000 for senior citizens would provide meaningful financial relief. Senior citizens, who often face higher medical expenses, would particularly benefit from this revision.
Universal Deduction under Section 80D
Currently, the deduction for health insurance premiums under Section 80D is available only to taxpayers who opt for the old tax regime. Extending this benefit to all taxpayers, regardless of their chosen tax regime, would encourage more people to invest in health insurance. This step aligns seamlessly with the government’s ambitious vision of financial inclusion and the goal of achieving “Insurance for All” by 2047.
Reducing GST on Health Insurance Premiums
Currently, an 18% GST is levied on health insurance premiums, significantly impacting affordability, especially for low- and middle-income families. Reducing this GST rate would make health insurance more accessible to these groups. Retaining the benefit of Input Tax Credit (ITC) deductions for insurers could also help keep premiums competitive, aiding industry growth and advancing the government’s healthcare objectives.
Allowing ITC Deduction for Corporates
Allowing Input Tax Credit (ITC) deductions for corporates on health insurance premiums would incentivize employers to provide insurance as a benefit to employees. This measure could extend coverage to millions of low-income employees who remain uninsured, while also easing the financial burden on businesses. A healthier workforce would ultimately boost productivity and economic growth.
Revising Rule 6E for Premium Reserves
The current Rule 6E permits only 50% reserve calculations for unexpired premiums. Adopting the 1/365 method, as recommended by the Insurance Regulatory and Development Authority of India (IRDAI), would provide a more accurate and modern approach to calculating premium reserves. This change would enhance the financial stability of insurers and build trust in the sector.
Implementing these changes could bring about significant, long-lasting following benefits:
Improved Affordability: Lower GST rates and higher deduction limits would make health insurance more affordable, especially for low-income families, enabling them to better manage medical expenses
Focus on Preventive Care: Greater affordability and access to insurance could encourage more regular medical check-ups, leading to early detection and treatment of illnesses. This would improve health outcomes across the population
Economic Stability: A well-insured population reduces pressure on public healthcare systems, fostering economic stability and resilience
A Call for Action
As we work towards a healthier and more financially secure India, these reforms have the potential to transform the health insurance landscape. They represent not just an investment in financial inclusion but also a commitment to enhancing the quality of life for millions of Indians.
We look forward to the Union Budget 2025 delivering on these critical priorities and fostering an inclusive, robust, and sustainable healthcare ecosystem.