Budget 2026 discussions spotlight rising medical costs, outdated health tax breaks, retirement annuity taxation, and the urgent need to expand affordable insurance coverage in India.
Will Budget 2026 Bring Key Reforms for Health and Insurance Sectors (Source: TSG)
Budget 2026 : The Budget Session of Parliament has officially begun. Prime Minister Narendra Modi described this phase as an important moment for the country as India moves ahead in the second quarter of the 21st century. He said the next 25 years will be very important for achieving the goal of Viksit Bharat 2047.
A day before the Union Budget, Finance Minister Nirmala Sitharaman presented the Economic Survey 2025–26 in Parliament. The Survey explains the government’s view of the current economic situation.
The Survey estimates India’s GDP growth at 6.8% to 7.2% for FY27. It also points to global economic uncertainty. However, it highlights that inflation is coming down and public finances are improving, which signals better economic stability.
The Union Budget, to be presented on Sunday, February 1, will be Sitharaman’s ninth consecutive Budget. The Economic Survey has set the background for major policy and spending decisions.
Shilpa Arora, Co-Founder and Chief Operating Officer of Insurance Samadhan, said India’s healthcare tax structure has not kept pace with rapidly rising medical expenses.
“Medical inflation is running at 12–14% annually, but Section 80D limits are stuck in a different decade,” she said. She explained that existing deductions Rs 25,000 for self and family, Rs 50,000 for senior citizen parents, and Rs 5,000 for preventive check-ups — are too low compared to today’s hospital and diagnostic costs.
Arora suggested that the government should raise the health insurance deduction to at least Rs 1–1.25 lakh. She also recommended increasing the preventive health check-up limit to Rs 20,000. According to her, “encouraging early diagnosis reduces hospitalisation costs and long-term claim burdens.”
Arora also raised concerns about retirement planning. She said that fully taxing annuity income discourages retirees from choosing guaranteed lifetime income options.
“With rising longevity and healthcare expenses, annuities should be treated as a social security tool,” she said. She proposed partial or full tax exemption on annuity payouts or higher deductions at the time of purchase. This could help retirees maintain stable income and better manage healthcare expenses.
Rakesh Kumar, MD and Founder of Square Insurance, said general insurance coverage in India remains low even though risks for individuals and businesses are increasing. “General insurance penetration is close to 1% of GDP, while the global average is over 4%,” he said. He believes Budget 2026 should make insurance simpler, more affordable, and more focused on prevention.
Kumar explained that offering incentives for risk reduction in areas such as agriculture, MSMEs, and infrastructure can lower future losses. He also stressed the need for digital insurance services and faster claim processing to reduce operational costs. “Insurance should be seen as a long-term economic safeguard, not just a post-disaster solution,” he said.
Kumar noted that commission expenses in the insurance industry are rising due to strong competition, higher use of single-premium products, bancassurance channels, and commission structures that pay heavily at the beginning.
Referring to IRDAI data, he said total commissions crossed Rs 60,000 crore in FY25 and are growing faster than premiums. “The issue is not commissions themselves, but how and when they are paid,” he said.
Kumar suggested spreading commission payments over the full policy term and linking them to customer retention and service quality. He also recommended promoting digital sales and improving agent productivity to manage costs while protecting distributor interests.
As the Budget date approaches, debates on healthcare tax relief, retirement income security, and insurance sector reforms are becoming stronger. These issues are expected to influence key announcements and policy directions in the upcoming Union Budget.
