Subscribe to Moneycontrol Pro and get 365 bonus InterMiles! Use Code: INTERMILES
Last Updated : Feb 22, 2016 11:55 AM IST | Source: Moneycontrol.com

Budget 2016: Service tax on insurance must be relooked at

Service tax on health insurance should be removed and tax exemption on health insurance should be hiked.

Saroj Satapathy
Ideal Insurance Brokers

It is common for all of us to stay glued during union budget bulletin, mostly to find out how an individual is getting benefitted or affected by tax regulations being spelt out. It is not unusual for someone to look only at the income tax, however, service tax and other taxes have started affecting day to day life of middle class of present society. The upcoming budget is not going to be any different. However, changing times calls for disruptive changes in the system so as to provide indirect benefit to each individual rather than giving them disposable cash to indulge in activity which will only provide temporary benefit.

Giving relief to middle class tax payers and promoting health insurance is one aspect which has become a permanent feature in almost all budgets. With medical inflation growing at a healthy +10% year on year the amount offered looks too little for anyone to look at a higher insurance value to get the protection. It is time that Finance minister makes it attractive by giving a higher exemption limit so that a higher sum insured can be availed for the entire family. A healthy family who can afford good treatment by best of doctors are only going to add to the national income. In fact, there should be service tax exemption on health insurance so that each individual can afford a higher sum insured. Further service tax limit has really gone up and going to keep on increasing in every budget. Imagine one can buy another health policy by just paying the service tax amount payable on the present exemption limit! With increase in life style diseases everyone is looking at buying critical illness cover, the minimum the government can do is to increase the limit to allow more citizens to avail a basic health policy with critical illness cover thus creating a healthy population ahead thereby increasing productivity.

Time has come to look at some of the products which need to be included under the tax exemption when government is looking at inclusive growth. There is need to look at giving tax exemption for personal accident policies bought as the number of accidents both man made and otherwise are rising every day. We can start with as small an amount of INR 1000 as exemption limit to make the same popular and treat the same as a social security measure. One more pragmatic step, which we can look at is making home insurance premium payable as tax free. We can avoid colossal national loss by making home insurance or dwelling insurance mandatory and premium payable exempted from tax to a limit which can be decided by the authority.

It is pertinent to note that we have to start using insurance as a tool to provide not only a safety chute but also as a social security measure to make it popular for people to fall back upon in case of any need. Once people start realising its benefit there will be demand from people rather than treat this as a 'push' measure.
First Published on Feb 22, 2016 09:40 am