Insurance Sector Expectations From Budget 2024: It is time to rethink the tax system so that the benefit of prices reaches the end consumer and more people have the opportunity to invest in life insurance.
Budget 2024 insurance Sector Expectations: The interim budget of 2024 will be presented by Finance Minister Nirmala Sitharaman in a few weeks. The insurance industry is expecting an increase in the tax benefit limit from Budget 2024 to increase insurance penetration in India. Tax discount on insurance policies has been encouraging people to adopt insurance, and will also help in meeting IRDAI’s target of increasing insurance adoption by people across India by 2047.
Insurance industry’s expectations from Budget 2024
The entire insurance category needs to be reconsidered to find the right balance. The maximum deductible limit of Rs 1,50,000 under Section 80C is exhausted due to other allowable expenses like PPF, loan etc. To fill this gap, there is a need to declare a dedicated discount category only for term insurance. This will also encourage taxpayers to choose a term plan with higher coverage. Also, there is a need to re-think about the GST rate of 18 percent. Now is the time to rethink the tax system so that the benefits of pricing reach the end consumer and encourage more people to invest in life insurance.
The limit of Rs 1.50 lakh under Section 80C should be increased – Insurance Sector
We must rethink how taxes work to make insurance fair. At present, the maximum deduction limit of Rs 1,50,000 under Section 80C is used for other expenses like PPF and loans. We should create a special discount category for term insurance to address this. This change will encourage people to choose term plans with better coverage. Also, there is a need to review the 18 percent GST rate. Now is the time to rethink the tax system so that the cost benefits reach consumers, and encourage more people to invest in life insurance.
Demand to give tax treatment to pension products like NPS
Apart from this, people postpone retirement planning for later which is not a financially sound decision. For this, it is important that pension products get the same tax treatment as the National Pension Scheme (NPS). In terms of tax, equal tax treatment for pension and annuity pension products will make them more attractive for people doing long-term financial planning. The current system taxes the entire annual income including both principal and interest. To promote wider adoption of pension products and ensure parity with other investment instruments, we recommend considering tax free status of the annual income received from these pension products. This will act as an incentive for people to secure their retirement and will bring pension products in line with existing tax norms.
Tax exemption extended to health saving accounts also
Also, underestimating the importance of health insurance in the post-Covid pandemic world is not the right decision. Considering the many innovations in the health insurance industry, the industry definitely needs some innovations in the tax structure as well. One aspect could be to increase most of the deduction limits to Rs 50,000 for self, spouse and dependent children and Rs 1,00,000 (₹ 1 lakh) for senior citizen parents. Additionally, tax discounts should also be extended to health savings accounts, giving people more money to plan for rising healthcare expenses.
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