Budget 2010 has brought some cheer to the esti- mated 55 lakh central govern- ment employees, offering tax breaks on contributions made by them towards the Central Government Health Scheme (CGHS).
The minister said that all con- tributions towards the scheme would come under the existing provision of section 80 D of the Income Tax Act thereby bring- ing them on par with other health insurance schemes.
"Besides, contribution to health insurance schemes which is currently allowed as a deduc- tion under the IT Act, I propose to allow contributions to the CGHS also as a deduction under the same provision," Mukherjee said in his budget speech.
The level of contributions towards CGHS from employees was raised last year. However, the amount remained unaltered for the retired employees.
Currently, those drawing a monthly pay package of Rs 7,600 and above are required to make a contribution of Rs 500 per month towards CGHS facilities.
However, those drawing a salary of Rs 4,600 to Rs 6,600 are needed to pay Rs 325 per month towards the health scheme. Contributions are between Rs 50 and Rs 225 for employees earning upto a monthly salary of Rs 4,200.
Earlier, there was no deduc- tion was allowable for this con- tribution.
Deduction in respect of pre- mium paid towards a health insurance policy upto a maxi- mum of Rs 15,000 would be available for self, spouse and dependant parents.
According to a KPMG analy- sis, the move would leave more money in the hands of the cen- tral government employees.
"With the introduction of this provision, the employee would be able to claim a deduction which would finally leave him with more money in his hand," a KPMG executive said.
CGHS is a medical facility available to serving and retired government servants.