Health insurance news update:
To enhance the affordability and appeal of health insurance, the government may propose reducing the GST tax rate to 12% from the current 18% for health insurance premiums up to Rs 30,000.
At present market rates, a premium of up to Rs 30,000 could secure health insurance coverage of around Rs 10 lakh per annum for a family of four, depending on factors such as coverage type and insured age. An official noted that a tax rate reduction could result in lower premiums or additional coverage options, aligning with people’s needs.
This proposal, pending since before the general elections, may be addressed in the GST Council after the elections, the official added.
In February, the Parliamentary Standing Committee on Finance chaired by BJP MP Jayant Sinha recommended rationalizing the 18% GST rate on insurance products, particularly health and term insurance, to enhance affordability.
Post-GST implementation, individuals must pay 18% GST for health insurance policies, marking a 3% increase from the previous Service Tax rate of 15% including applicable cess.
Under the income tax regime, the deduction for health insurance premiums under section 80D is capped at either Rs 25,000 or Rs 50,000 based on conditions.
A Niti Aayog report in 2021 suggested extending the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PMJAY) scheme to the ‘missing middle’ on a paid basis, considering that many people in the country are at risk of falling into poverty due to medical expenses. PMJAY offers Rs 5 lakh annual free health coverage to 107 million poor households, accounting for 40% of the population.
