BackBudget 2021: 'Govt should focus on making insurance more than a tax saving tool'
'Having a separate tax deduction towards insurance premiums, over and above the current 80C limit, similar to one allowed for NPS.'
PremiumUnion Budget 2020 must initiate some new measures to make insurance policies more attractive and customer-friendly, insurance players have demanded. In 2018, insurance penetration in India was one of the lowest at 3.70%, according to the annual report by Insurance Regulatory and Development Authority of India (IRDAI). Experts expect higher tax deductions in the Budget.
"Having a separate tax deduction towards insurance premiums, over and above the current 80C limit, similar to one allowed for NPS. Alternatively, enhancing the insurance limits under section 80C and 80D will further encourage people to opt for life insurance. Implementing either of the proposed recommendations will aid in bridging the protection gap in the country," says Rushabh Gandhi, Deputy CEO, IndiaFirst Life Insurance.
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Insurance experts believe the Government must aim towards making life insurance policies more than a tax saving tool and focus should be on policy persistence.
"Introducing separate deduction of ₹50,000 for first time life insurance buyers and an additional capping of ₹50,000 for someone purchasing a pure protection (term) plan will put life insurance on fast track," says Kamlesh Rao, MD & CEO, Aditya Birla Sun Life Insurance.
Rushabh Gandhi proposes linking of Sec 10(10D) to policy persistency instead of amount of Sum Assured i.e. Sec 10(10D) should be available for policies where minimum fivr annual premiums have been paid with minimum policy term of 10 years.
Other areas of consideration include amendments in tax treatment for annuity as proposed by PFRDA regulator i.e. making annuity income as tax free income, leading to greater uptake in annuity policies resulting in improved financial security during post retirement years.
This recommendation is particularly critical in India which has limited social security measures.
In order to increase the insurance penetration, insurance experts believe it is necessary to relook at the 18% GST structure, say experts.
"We hope the government reassesses the GST rate structure for pure protection cover and offers relaxation on existing 18% GST," says Rushabh Gandhi.
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