Budget 2023: Insurers wish for life insurance annuity, pension products at par of NPS. Here's why
3 min read . Updated: 31 Jan 2023, 07:07 PM IST
Premium- Apart from tax rebates, there is a need to drive investments in insurance sector for retirement planning, and expectations are that government brings key measures to do so.
Every year, the key developments in the Budget do not just focus on corporate-wise factors but also there are policies and measures announced to boost a common citizen's day-to-day lifestyle depending upon the economic scenarios. Once again, all eyes are set on FM Nirmala Sitharaman who is going to present the budget for fiscal year FY24 on February 1st. Apart from tax rebates, there is a need to drive investments in insurance sector for retirement planning, and expectations are that government brings key measures to do so.
Tarun Chugh, MD & CEO, of Bajaj Allianz Life Insurance, said, “The Union Budget is an opportunity to introduce new reforms for the betterment of the citizens and the nation at large. As the life insurance sector, our paramount interest has always been to insure more citizens and ensure they have the apt coverage."
Further, Chugh added, "Towards this, our collective initiatives will be augmented if the government may introduce a separate tax deduction limit exclusively for life insurance premiums paid. Furthermore, we’d also request that the government brings life insurance Annuity or Pension products at par with NPS, especially from a tax deduction point of view. This, we believe, will help citizens plan for regular income during their retired years, in an effective manner."
Regulated by PFRDA, NPS is a voluntary retirement savings scheme introduced for investors to make a defined contribution towards planned savings thereby securing the future in the form of a Pension. NPS is seen as the world’s lowest-cost pension scheme. Not just that, also administrative charges and fund management fees are the lowest. Subscribers can choose their own investment options and pension fund and see their money grow.
Notably, NPS offers a host of tax benefits. Any individual who is a subscriber of NPS can claim tax exemptions under 80 CCD (1) within the overall ceiling of ₹1.5 lakh under Sec 80 CCE. Furthermore, an additional tax benefit for investments up to ₹50,000 in NPS ((Tier I account) is available exclusively to subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of the Income Tax Act. 1961.
Life insurance annuity means that the insurer makes a fixed payment to you either immediately or in the future. Here as well, there is ₹1.5 lakh tax deduction limit offered under section 80C.
On the other hand, Yogesh Agarwal, Founder, and CEO, of Onsurity said, "Composite license is an aspect that the government should push for because this will benefit the industry as well as policyholders alike. It will give insurers the necessary economies of scale and customers the option to buy multiple products from the same insurer, in turn lowering the cost of distribution (40% - 50% of premium) which is one of the major costs of operating an insurance business. For policyholders, this will reduce the burden of excessive documentation and remembering renewal timelines."
Also, Mukul Kanchan, VP and Head of Finance, Plum said, "We expect the government to make bold moves by introducing certain incentives. One of the long-standing demands of the insurance industry is the reduction of the 18% GST rate from health and life insurance products to make them more affordable. Additionally, increasing the limit to claim tax deductions under sections 80C and 80D would further increase the adoption of life and health insurance products."
Kanchan added, "also, the rising cost of medical and hospitalization expenses has made health insurance products costlier, therefore incentives for the healthcare sector from the government will go a long way."
Additionally, Kanchan said, alongside, special support/ incentives/ deductions can be introduced for MSMEs that provide health insurance to employees and their families. This will aid in providing the cover to the missing middle.
Further, Surjendu Kuila- Co-Founder and CEO, Zopper on the insurance sector said, "As this will be the last full budget for the current government, the sector expects some of the much-awaited reforms to see the light of day. These might include increasing tax benefits for the end consumer from ₹50,000 to ₹1,00,000 and a 100% deduction against medical expenses without any value cap. If introduced, these will boost the entire insurance ecosystem while opening new horizons and helping increase insurance penetration in India."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
