Top insurance company officials want Finance Minister Nirmala Sitharaman to give a boost to life and health insurance sectors when she presents the National Democratic Alliance’s (NDA) 2.0’s second Budget on February 1.
On top of the insurance industry wish list are the demands to hike section 80D deduction limit for health insurance premiums and introduction of separate tax benefit for term insurance premiums.
Additional deduction for term insurance premiums
In addition, in order to underline the importance of having adequate life insurance coverage in place, the government should consider carving out a separate deduction for term insurance premium. “Key interventions such as increasing tax deduction limits under Section 80C for life insurance premiums or introducing a separate limit exclusively for term insurance and pension policies, can significantly boost life insurance penetration. Additionally, implementing mandatory basic term life insurance coverage for formal employment, akin to the Employees’ Provident Fund (EPF), will ensure financial security for dependents in case of untimely demise,” says Sandip Goenka, CEO, ACKO Life Insurance.
Hike 80D deduction limit on health insurance premiums
Given the rising healthcare inflation – 12-15 percent as per industry estimates – a health insurance cover is a basic necessity. And this calls for an increase in the section 80D deduction limit for health insurance premiums paid, which is available under the old regime. “India last witnessed an enhancement in the deduction limit in 2015-16. It is best if the limit for medical insurance is linked to inflation and gets revised automatically every year or once in a couple of years. Also, the benefits need to be extended to the new tax regime as well since increasing health insurance penetration is critical,” says Anup Rau, MD & CEO, Future Generali India Insurance.
Premium rise on account of elevated inflation is a challenge that many senior citizens are grappling with. “The government should reduce tax burden by increasing the limits under section 80D of the Income Tax Act for premium paid for health insurance to Rs 50,000 for all and Rs 1 lakh for senior citizens,” adds Srikanth Kandikonda – Chief Financial Officer, ManipalCigna Health Insurance.
Give a boost to retirement planning
A long-standing demand from life insurance companies has been the abolition of tax on annuity or pension income. They are annuity service providers for their own customers as well as individuals who invest through the National Pension System (NPS) and approach insurers to convert 40 percent of their corpus into annuities, as mandated under the scheme.
“With the retirement savings gap projected to reach $85 trillion by 2050, simplifying or removing taxes on annuity and pension products, including those under NPS, will encourage greater participation in retirement planning,” says Jude Gomes, MD and CEO, Ageas Federal Life Insurance. He also wants FM Sitharaman to consider extending the additional Rs 50,000 tax exemption for NPS contributions to pension plans from life insurance companies too.