Insurance Sector Wishlist Ahead of Budget 2024
Insurance sector is counting on Budget 2024 to deliver substantive measures that will cement the government’s commitment to Insurance For All by 2047
As the newly elected government settles into its third term after the elections, it prepares to present the new Budget that forecasts pivotal changes for India’s financial sector. The insurance industry looks forward to long-overdue reforms that will propel the sector forward and support the economy.
With India’s insurance penetration still not on par with global standards, the industry is urging policymakers to introduce meaningful changes that will incentivize adoption, increase accessibility, and drive growth. Tax benefits have proven to be a potent catalyst in the past, and the sector is counting on Budget 2024 to deliver substantive measures that will cement the government’s commitment to Insurance For All by 2047.
Reviewing taxation for pension products
As India’s population ages, there is a need to take cognizance of their needs and reassess the taxation on annuities to ensure the financial stability of this segment. With millions of Indians set to enter their golden years in the coming decades, their retirement income must allow them to maintain a dignified standard of living. To ensure a secure financial future for India’s aging population, retirement planning must be made more appealing. The insurance industry urges the government to level the playing field by granting pension products the same tax benefits as the National Pension System (NPS).
Currently, annuity income is fully taxable, including both principal and interest, which discourages individuals from investing in these products. By exempting annuity income from taxes, the government can incentivize people to plan for their retirement, bringing annuity products in line with existing tax norms and creating a supportive environment for their growth. This move would empower individuals to secure their financial future and promote a culture of retirement planning in India.
Incentivising health insurance for MSMEs
To make health insurance more inclusive and widespread, group health insurance policies should be made more attractive and rewarding, especially for Micro, Small, and Medium Enterprises (MSMEs). These businesses rely heavily on employee health insurance as a vital tool for attracting and retaining talent. However, the current GST regulations pose a significant burden, as MSMEs cannot claim input credit for the GST paid on employee health insurance premiums.
While a complete waiver might not be feasible for all businesses, the government may consider offering this relief to MSMEs, which are the bedrock of India’s entrepreneurial ecosystem and drivers of economic growth. By doing so, MSMEs can provide their employees with comprehensive health coverage, ultimately contributing to a healthier and more secure workforce.
Expanding the scope of tax deductions under Section 80C
The insurance industry has been urging an overhaul of tax deductions under Section 80C, particularly the long-standing deduction limit of Rs 1,50,000. With various other eligible expenses like PPF and loans depleting this limit, there’s little room for essential financial investments. To tackle this, a dedicated tax exemption category exclusively for term insurance is necessary. This would motivate taxpayers to opt for comprehensive term plans, fostering financial security for individuals and families. Moreover, the industry seeks a reassessment of the GST rate, currently at 18% for health and term insurance. Reducing this limit to 5% would help pass down the pricing benefit to the end consumer and in turn, lead to a wider adoption of these crucial protection products.
A revised and relaxed tax structure would ensure that consumers benefit from affordable pricing, encouraging greater adoption of life insurance. A balanced tax regime is crucial for the industry’s growth, stability, and ultimately, the well-being of policyholders.
Written By – Tarun Mathur, Co-founder and CBO, Policybazaar.com
Disclaimer:The views expressed in this article are those of the author and do not represent the stand of this publication.
