Finance Minister Nirmala Sitharaman on February 1, 2020, presented the annual budget for the fiscal year 2020-21, which begins from April. The NDA-led government unveiled its second annual budget after winning the Lok Sabha elections for the second consecutive term. The finance minister in her budget speech made some major announcements which were directed towards the taxpayers of the country. With budget 2020, the government has tried to put more money in the hands of taxpayers by curtailing the incentives to save.
This year, the finance minister has provided taxpayers with two options – the old regime and the new regime. Under the old or existing income tax regime, the taxpayers are allowed to avail existing income tax exemptions and deductions while the new tax regime comes with slashed income tax rates and seven new income tax slabs but without any tax exemptions and deductions. Now which tax regime – the old or new – is beneficial for whom is very subjective to a taxpayer’s income composition and investments made, though it is quite clear that the new tax scheme will significantly benefit taxpayers falling in certain brackets if not all.
Talking about the impact of budget 2020 on the Indian health insurance industry, it is true that tax exemptions are an important incentive for the purchase of health insurance. As per the Finance Act (India), premiums paid towards medical insurance offers tax benefits under Section 80D of the Income Tax Act. With the new income tax regime in place, people may not be motivated to buy health insurance as strongly they are today. What people need to understand is that health insurance apart from saving you from the massive cost of medical expenses in case of adversity, helps you to enjoy tax rebate at the same time.
Focus on healthcare
Even the finance minister while presenting the financial budget this year emphasised on improving healthcare needs of the masses. In total, Rs 69,000 crore has been allocated towards the healthcare sector with an aim to increase access to quality healthcare services particularly in Tier II and III Indian cities. With investment in healthcare going up, the clear focus of the budget seems to focus on making healthcare more accessible with increased infrastructure. It is also believed that the measures proposed in the budget will support to regulate the gap and play an important role in making healthcare a priority for one and all and create further awareness around health insurance. An adequate health insurance policy not only protects you from any financial loss due to an unexpected medical emergency but even gives you access to quality healthcare services.
India also has recorded the highest out-of-pocket expenditure on healthcare, as compared to other developing nations and most of the measures proposed in this year’s budget will support to regulate this wide gap with the help of health insurance. Fortunately, various health insurers have already developed insurance products that cover out-of-pocket expenses like OPD and day-care procedures. This will provide a significant boost to the health insurance penetration rate in India.
The core objective of insurance is protection, and that is what must be the focus area, i.e. term life, health, and disability products. The insights show that consumers must not buy these products for tax benefit alone. This budget will validate these insights, as it is believed that it’s time the middle class buys insurance for its real benefit, which is protection.
With so many changes being made, it will be interesting to see at what does the aspirational Indian now looks at. Anyone going for the new tax structure will surely end up spending more on not so important products rather than spending on discretionary items. While making a choice, the aspiring Indian will need to keep in mind that money not spent on some very important financial elements like insurance just in the urge of saving more tax could become a regret at some point in the future as situations like death, disease and disability can hit anyone, anytime and it is always better to stay prepared.
Main Source - Cnbctv18