Budget expectations: Separate tax deduction limit and no GST on insurance plan
In the wake of a transformative year for the insurance industry, marked by the influx of new companies, technological innovations, and changing consumer dynamics, the stage is set for competitive landscape with the need to increase insurance penetration in the country, which is currently at 4%. The good part is that Indians have become more aware of the need and urgency of buying a life and health insurance policy, partly triggered by Covid-19. With insurance companies growing steadily and contributing to the Indian economy here is a list of budget expectations of the industry leaders:
Satishwar B, MD & CEO, Aegon Life Insurance
No Taxation for Annuity Plans to Benefit Both Retirees and the Industry
Many Indians don’t save enough for retirement, and the gap between needed and available retirement funds is expected to reach $85 trillion by 2050. To help close this gap, consider these steps:
Investing in pension and annuity products is crucial for income after retirement. Making taxes simpler or removing them for these products will encourage more people to invest in these important financial protections. Pension policies, like the NPS, provide a steady income in retirement. It's important to lessen the tax load for people receiving pensions from the National Pension System (NPS), as the retirement fund gap is expected to increase a lot. The current Rs.50,000 tax exemption for NPS under Section 80CCD(1B) should also apply to pension and annuity plans to encourage more people to use them.
Improving Tax Benefits to Increase Insurance Coverage:
India faces a severe issue with inadequate insurance. When a family's primary earner passes away, the money left for the survivors to live and settle debts is usually less than nine percent of what's actually needed.
Separating Savings for Life and Health: Changing tax sections 80C and 80D to provide separate tax breaks for the life-threatening risk part of life and health insurance payments, as well as for fixed-term insurance plans, could help close the gap in death risk coverage and enhance social security.
Complete Deduction for Life Insurance Premiums: Permitting individuals to deduct the entire amount paid for life insurance premiums from their taxable income, as stated in Section 56, without any decrease due to claims made under other sections such as 80C, will encourage more people to buy insurance. This means they get the full tax benefit for their insurance premiums, making insurance more financially appealing.
