Budget 2015: Tax-free medical expenses cap may be hiked to Rs 25,000

NEW DELHI: The government is reviewing the tax-free medical reimbursement limit, currently fixed at Rs 15,000 a year, besides looking at making it more attractive for individuals to buy medical insurance policies.

Sources said both the issues are being looked at ahead of the Budget with some indicating that there is a possibility that the limit on tax-free medical reimbursement from employers may be raised to Rs 25,000 a year, given the rising medical costs in the country.

Similarly, the government, which allows a deduction of Rs 15,000 a year for medical insurance premium paid for spouse, children as well as the policy holder, is looking at encouraging individuals to buy a higher cover. In case of senior citizens the limit is Rs 20,000.

The review comes as the limits were fixed several years ago and costs have gone up significantly since them. For instance, in the wake of rising claims, insurance companies have increased the premium on medical insurance on several occasions over the past few years.

There is also a view that medicine costs have increased and a Rs 15,000 annual limit on tax-free medical reimbursement often does not meet the hospitalization requirements. While getting admission in government hospitals is not an easy task given the pressure on beds, private hospital charges are very high, resulting in the limit being breached easily.

The encouragement to medical insurance is also aimed at reducing the pressure on state-run hospitals, while encouraging people to cover their risks. Often individuals buy insurance policies only to ensure that they are able to claim tax deductions and end up having lower than required cover for their family in case of a health emergency.

The BJP government has repeatedly said that it is against high taxation and wants to leave more money in the pockets of individuals to help increase investment and boost savings. The review of benefits for health spending is aimed at making the limits more realistic and in sync with current requirements.