Covid propels need for Union govt to consider medical expenditure and insurance premium deduction

Bengaluru, January 13, 2022:

Covid-19 pandemic has stirred a hornet’s nest where rising medical expenditure and insurance premiums are proving to be a big blow to the patients. 

In view of the pandemic, which is threatening to become an endemic, the insurance companies have increased the premium quietly and therefore the deduction has to be appropriately increased for all segment of the working population, said A Ganesan, group vice chairman, Neuberg Diagnostics.

Another thorn in the flesh is the medical expenditure deduction which needs to be looked into.  Currently, those who do not have a healthcare cover are entitled to claim up to Rs. 50,000 towards medical expenditure incurred. There are a number of people, who do not have a health cover, particularly, those above 60 years. These people are impacted due to the pandemic. Hence, this limit has to be increased substantially or at least up to Rs. 1,00,000, Ganesan pointed out.

In a situation where incomes are strapped for people, there is need for a personal income tax reduction. This is because for the last several years, there has been no increase in the personal income tax threshold. With unexpected medical expenses and untoward health emergencies, we see the need for this threshold limit to be increased to Rs. 5 lakh for less than 60 years, Rs. 6 lakh for senior citizen and Rs. 8 lakh for super senior citizen. Section 115 BAC has to be deleted, he said.

Another challenge is GST. There is need for a GST reduction significantly across all products and services. Healthcare services has to be brought under GST regime with 1% levy so that they are able to avail the input credit available, which go as waste now, resulting in higher cost of services. If this is done, the overall cost of healthcare services will actually come down benefitting larger section of the people, said Ganesan.

The requirement of persons having income above Rs. 50 lakh need to furnish assets/liability (AL) statement was introduced almost 7 to 8 years back. With income levels going up to salaried class, those having taxable income above Rs. 50 lakh in the salaried class have gone up substantially. Again, the AL statement actually does not serve any major purpose. Hence, this requirement has to be done away with for at least salaried persons and the limit has to be increased Rs. 1 crore for others.

Moving on to the penalty under section 270 A of 200%, Ganesan noted it as very harsh. “The definition of misreporting or wrong reporting can be interpreted in either way with the result, taxpayers who never had any intention to conceal are facing huge penalties. These high-pitched penalty assessments are likely to be litigated for long and the intent of this section might get diluted. The penalty cannot be more than 100% of tax sought to be evaded.” 
 
With pharma industry being an essential for healthcare and diagnostics supplies, Ganesan said that MSME cash flow is in crisis. The sector is still facing difficulties as regards receivable payments and even Government departments are not respecting the MSME laws. “In fact, the maximum defaulters are only public sector undertakings and government departments. The government has to introduce stiffer penalties for defaulters so that the MSMEs get adequate protection from cash flow crisis.”  PharmaBiz