Caring for your parents will be rewarded now

BUDGET & THE INDIVIDUAL

HEALTH INSURANCE: Total deduction under Section 80D doubles to Rs 30,000.

With an aim to address the issue of healthcare for the elderly, the Union Budget has proposed a deduction of Rs 15,000 per annum under Section 80D to an individual who pays medical insurance premium for his/her parents.

This deduction is over and above the existing deduction of Rs 15,000 for premium paid on medical insurance for self and dependant family.

In short, an individual is now eligible for a total deduction of Rs 30,000 under Section 80D for premium paid towards securing health insurance for self and parents.

The benefit for the individual by way of an additional tax saving works out to Rs 4,500 per annum, assuming that the individual falls in the highest tax bracket of 30 per cent.

Overall, the move is in the right direction as health costs are rising and unlikely to decline. Changing lifestyles have also meant increasing incidence of ill health.

According to a study by Ficci-Ernst & Young, between 1993-1994 and 2001-2002, the aggregate household expenditure on health services increased at an annual compounded rate of 9.3 per cent, showing a demand for higher standards of healthcare.

The study says, "In addition, the top 33 per cent of income earners in India accounted for 75 per cent of total private expenditure on healthcare in 2004, of which, high-income households (the top 8 per cent) paid $578 (Rs 23,120) per treatment and hospitalisation in 2004, which was approximately three times the overall average of $191 (Rs 7,640)."

In India, the amount of expenditure incurred on healthcare by individuals is largely funded through out-of-pocket (withdrawal from savings).

Estimates indicate that the same is at over 90 per cent, compared with under 20 per cent in developed countries. This also indicates that a single instance of hospitalisation can be a setback for individuals not covered under health insurance.

Hence, the need to increase the abysmally low penetration of health insurance. Says Sitesh Prasad, head (accident and health), Tata AIG Life, "The penetration levels are amazingly low. The ballpark estimates put the penetration at about 3-4 per cent." And, the same for elderly will, at best, be at similar levels, if not lower.

Says Sandeep Bakhshi, MD & CEO, ICICI Lombard General, "It is a welcome step as it lays emphasis on health insurance for senior citizens, and is also a positive for the growth of the health insurance sector. This would give an added incentive to employees who are usually covered under their company's group health insurance scheme to avail of the tax benefits under Section 80D."

In short, the elderly, who face the problem of getting insured because of high costs, stand a better chance now.