Section 80D Tax Deduction Limit Should Be Increased

In view of the increasing cost of living and medical expenses, advocates of tax experts are demanding an increase in section 80D tax deduction for health insurance premium paid. The current limit is Rs 25,000 per year for taxpayers below 60 years old, while senior citizens can claim a higher limit of up to Rs 50,000.

Critics argue that the current limit does not meet the financial burden on individuals who need comprehensive coverage, particularly those who support elderly parents or in-laws. They also point out that healthcare costs have increased significantly over the past few years due to factors like lifestyle disorders and medical inflation rates.

Aarti Raote, Partner of Deloitte India, emphasizes the necessity for a higher deduction limit: "In light of rising health insurance costs post COVID-19 and increasing critical ailments among taxpayers, it is indispensable that an increase in the section 80D tax deduction be considered. A larger deduction would alleviate financial burdens and offer better relief to taxpayers."

Industry stakeholders like Shilpa Arora, Co-Founder & COO of Insurance Samadhan, also support the proposal. She notes, "The rising prevalence of lifestyle disorders, growing cancer cases, and soaring medical inflation are creating it tough for taxpayers to manage medical expenses.

Moreover, Rahul Charkha, Partner of Economic Laws Practice (ELP), suggests increasing the health insurance premium deduction limit from Rs 1 lakh (the current highest limit under the old tax regime) to up to Rs 2.5 lakhs: "To ease the financial burden on individuals seeking to protect their interests amid rising healthcare costs, it is essential for the government to offer an increase in this deduction."

Both experts stress that a higher deduction limit would help encourage taxpayers to opt for higher-sum insured policies and provide financial protection against escalating healthcare costs.

Now, in consideration of various stakeholders' views, some are also suggesting that health insurance deduction should be extended to the new tax regime but it's not decided yet.

Also See- Section 80C Tax Deduction Limit