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Higher tax exemption for health insurance premium

But increase in service tax can push up premiums

Priya Nair  |  Mumbai 

In order to encourage people to buy more health insurance, Finance Minister Arun Jaitley today increased tax exemption limits under Section 80 D for payment of health insurance premium.

According to the Union 2015-16, the tax exemption on premiums for health insurance for individuals and family has been increased from Rs 15,000 to 20,000 and for senior citizens from Rs 20,000 to Rs 30,000..

Read our full coverage on Union Budget

For very senior citizens, the tax exemption on expenditure on specific illness such as heart ailments or cancer has been increased from Rs 60,000 to Rs 80,000. For very senior citizens, above 80 years, tax exemption has been allowed up to Rs 30,000 for any medical treatment for self.

Read our full coverage on Union Budget

But with the increase in service tax from 12.3 to 14%, premiums could see a rise.

Nikhil Apte, Chief Product Office - Health, Royal Sundaram says that this will definitely encourage people to take more health insurance. "Today most people buy health insurance of about Rs 2-3 lakh to keep premiums low. But with the increase in the limits, we may see more people buying policies of around Rs 10 lakh cover since the premium will be around RS 25,000," he says.

K K Mishra, CEO, Tata AIG General Insurance says that this move will help those above 40 years get better health cover because medical costs are rising. "Now people need not feel constrained by the tax limit on health insurance and can buy higher cover," he said.

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First Published: Sat, February 28 2015. 13:16 IST