Insurance remains one of the indispensable parts of your portfolio, especially during the testing times of COVID-19. It not only provides financial cushion at the time of need but also offers tax benefits incentivising more people to safeguard their families. As the Budget day approaches on February 1, 2022, here are some of the pre-Budget expectations from the leading voices of the insurance sector:
Prashant Tripathy, MD & CEO, Max Life Insurance
Life insurance is a critical component in ensuring the nation's financial protection apart from fueling the growth of the economy. Concerning the upcoming Budget, impactful tax relief measures can result in higher life insurance uptake across the country. Firstly, there is a need to introduce parity between annuity/pension products issued by life insurance companies, NPS and other saving products. This can be done in two ways - in the case of pay-out under pension/ annuity policies, only the accretion amount should be taxed once the payment crosses the principal amount invested by the policyholders. Furthermore, an additional deduction of Rs. 50,000 available in case of contribution towards NPS should also be allowed for annuity and pension plans of life insurance companies. This will allow for greater adoption of pension/retirement products.
Secondly, term policies are universally recognised as the lowest cost option to create security for the family members and dependents. Therefore, introducing separate tax benefits for term insurance outside 80C will help increase the penetration, which is essential in these financially challenging times. Alongside, today the Indian insurance sector is working towards two critical underpenetrated areas - protection and retirement, and hence, there is a need to promote it through tax incentives.
Anup Rau, MD & CEO, Future Generali India Insurance
The lessons learnt from the COVID-19 pandemic underline that capitalising on health is no longer optional. Stable, equitable, thriving, and peaceful societies and economies are only possible when no one is left behind. This crisis has presented an opportunity to prioritise and bring forth structural changes that benefit the population. To further give a boost to health insurance and its deeper penetration in the country, I urge the government to consider the below:
GST Reduction from 18 to 5 per cent: In the order of needs, protecting health is of utmost importance, and due to the looming pandemic, health insurance is more relevant than ever. Health insurance is an essential commodity and needs to be slotted in the 5 per cent GST tax slab to make it more affordable to access quality healthcare. A significant reduction in the GST on all personal lines of products-from the existing 18 to 5 per cent will encourage more people to buy health insurance. For senior citizens, it should be exempted.
Increasing the limit for health insurance under section 80D: The increase in tax deduction limit in Section 80D of the Income Tax Act can further help in penetration of health insurance. Under Section 80D, an individual can claim up to Rs. 25,000 deduction for self and family. This limit should be increased to Rs. 1,50,000. The rising medical costs and the increase in the incidence of critical illnesses make it an unmanageable expense for middle-income and lower-income groups. So, a higher tax deduction limit for health insurance plans is the need.
Small ticket insurance products: Given the under-penetration of insurance in India and the need to bring a wider gamut of population under the safety net, small ticket size insurance products like micro-insurance, sachet products, etc. can be exempted from GST. This will provide added boost to these products by making them affordable thereby enabling the population to get exposed to low-cost insurance products and appreciate their value better.
Akhil Chandna, Partner at Grant Thornton Bharat
An increase in deduction for medical insurance premium to incentivise wider coverage for medical insurance and increase in the overall deduction for specified investments under section 80C would go a long way in boosting disposable income for the individual taxpayers who are one of the major contributors to government's direct tax revenues.
Suvendu Prusty, Co-founder and Director, Riskcovry
In India, the insurance has deep rooted history which has witnessed an impressive growth rate over the last two decades driven by important government initiatives, strong democratic factors, conducive regulatory environment, increased partnerships, product innovations, and vibrant distribution channels. The recent pandemic and natural calamities have emphasised the importance of healthcare and home insurance on the economy, and the need to increase insurance penetration and density in India. One way of ensuring this is by making health and home insurance mandatory for families with a household income of more than Rs 10 lakhs. In addition to this, exclusion of GST on health and home insurance premiums; along with an extension in deduction for premium paid for home insurance under income tax regulations will reduce financial burden on citizens as well as the Government.
Yashish Dahiya, CEO & Chairman, PB Fintech
Tax exemption has greatly benefitted the insurance industry by acting as a catalyst to opt for insurance, and also by providing far-reaching awareness. However, as insurance still continues to be under-penetrated in India, the key recommendation would be to focus on initiatives that ensure a higher adoption of insurance. This is all the more vital in these COVID times that have propelled the need for insurance like never before. From the budget perspective, promoting pure risk products by increasing the tax deduction limit for health insurance products and introducing a separate deduction for term insurance products could be a positive stride in this direction. We recommend a separate deduction of Rs 50,000 from taxable income over and above the maximum limit of Rs 1,50,000 to be introduced for pure term insurance under section 80CCE. Other pivotal areas should be around flexibility in pension products by introducing separate deductions for them and making annuity income earned from these products tax-free. The overall motive is to make insurance products greatly accessible as well as cost-effective for everyone.
Srinath Mukherji, Co-Founder, SANA Insurance Brokers Pvt. Ltd.
Reduce GST on health insurance, since medical services have either Nil GST or at a lower rate. It is a disincentive for the customer to take much needed health insurance. That amount could instead be utilized for buying higher coverage, thus getting full value for money and making health insurance more affordable for buyers.
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