Insurance firms eye tax reliefs in upcoming Budget to boost penetration

Life insurance companies have called for tax deductions on annuity products as well as lower goods and services tax (GST) on their products

Indian insurance companies are eyeing multiple tax exemptions from the central government in the upcoming Union Budget to enhance attractiveness and affordability of insurance products, thereby promoting greater penetration nationwide.

Life insurance companies have called for tax deduction on annuities as well as lower goods and services tax (GST) on their other products. Further, the industry is also hoping that the government will tweak the new tax regime to include tax exemption for life insurance products. Currently, the new tax regime does not allow any exemptions on these products, which were allowed under 80C in the old tax regime.

“We urge the government to align life insurance annuity or pension products with the National Pension Scheme (NPS) and allow similar additional deduction of Rs 50,000 or more for life insurance annuity or pension products under income tax,” said Tarun Chugh, MD & CEO, Bajaj Allianz Life Insurance.

Non-life insurance companies have reiterated there is a need to reduce GST rates from 18 per cent to 5 per cent on health insurance products to make them affordable so that there is greater uptake of such products.

“Currently, out of pocket expenses are still high relative to global standards, indicating a considerable protection gap. The insurance regulator has set a vision of achieving insurance for all by 2047. Thus, our submission to the government is to reduce the current 18 per cent GST rate on essential services like health Insurance,” said Prasun Sikdar, MD & CEO, ManipalCigna Health Insurance.

For the last few years, insurers have also proposed an increase in the limit of tax deduction under 80D of the Income Tax Act. Under this section, a person can claim a deduction of up to Rs 25,000 for health insurance premium and expenses incurred towards medical expenses under the old tax regime. According to experts, increasing the deduction limit for medical insurance to Rs 50,000 for individuals from the existing Rs 25,000 and raising it to Rs 75,000 from Rs 50,000 for elderly people will help cover the surge in healthcare expenses.

“Besides financial protection, health insurance offers tax benefits under Section 80D, making it attractive from a savings perspective. The 80D tax exemption should be linked to inflation and revised periodically,” said Krishnan Ramchandran, MD & CEO, Niva Bupa Health Insurance.

The insurance industry is also keenly awaiting better implementation, greater participation of multi-specialty and corporate hospitals, and improved reach to the deserving Below Poverty Line (BPL) population, according to Dr S Prakash, MD & CEO-designate, Galaxy Health Insurance Company Limited, India.