Chennai, Jan 22 (SocialNews.XYZ) With 2024 being the Lok Sabha election year, Indian insurers are expecting more tax concessions for their policyholders from Finance Minister Nirmala Sitharaman, so that industry can also prosper.
Scrapping or slashing of Goods and Services Tax (GST) on insurance premiums, making pension/annuity proceeds tax-free, and creating a separate category for tax deduction for premium paid are some of the budget wishlist of Indian insurers.
The industry players are also expecting the Indian government to introduce the Insurance Laws (Amendment) Bill 2022, which is also expected to lead to the industry's growth.
"Incentives like a GST exemption or a reduced GST slab can further help in meeting the needs of consumers. Pension/annuity proceeds should be made tax-free in the hands of policyholders, or a deduction for the principal component should be allowed," Aegon Life Insurance Managing Director and CEO Satishwar B. said.
He also said, an aggregate deduction of up to Rs 1.75 lakh, for the premiums paid for life and health can be introduced to nurture the ecosystem of insurers, insurtechs, and consumers.
Apart from making pension tax-free, Ageas Federal Life Insurance CEO and MD Vighnesh Shahane said the government should also make the maturity amount under unit linked insurance policies (ULIP), where the annual premium is Rs 2.5 lakh or more, tax free.
"To increase the penetration of pension and to make India a pension society, especially since we don't have any social security cover, our request is to make pensions tax-free in the hands of the customer because the pension premium is already paid through taxable income," he said.
The proceeds of the pension/annuity should be made tax-free in the hands of the customer or to allow deduction for the principal component, he added.
Listing out other budget wishlist, Shahane said there should be a higher deduction limit in the case of health insurance premium under Section 80D of the Income Tax Act while the current limit is only Rs 25,000.
He also said the Section 80C of the Income Tax Act is cluttered with various investment options for tax benefits, and there should be a separate section for life insurance or the limit be increased from Rs 1.5 lakh to Rs 2.5 lakh.
At least a separate section for term life insurance policies would be helpful given the huge protection gap in the country, Shahane added.
"We recommend zero-rated GST for protection products as 18 per cent GST makes the term plans costlier. To increase insurance penetration in the country, the basic protection plans should be made available under zero-rated GST," he said.
Raising the tax deducted at source (TDS) exemption limit on insurance commission (under section 194 D of the Income Tax Act) from the current level of Rs 15,000 would provide a greater impetus to insurance agents, Shahane added.
Considering the low single-digit penetration of life insurance in India, tax incentives can be expected to be focused on first-time life-insurers and on the principal component of annuity income. Special incentives may also be announced for women who currently account for barely more than one-third of the country's life-insurance covers, Edelweiss Tokio Life Insurance Executive Director Subhrajit Mukhopadhyay said.
He also said the amendments proposed to the two insurance laws will accelerate the industry's growth and the Indian government should also consider incentivising investments into life insurance products that will facilitate infrastructure and overall development of the country.
The wishlist of the general insurers are majorly two - reduction of GST so that health insurance becomes affordable, and higher IT deduction for health insurance premium.
"In spite of pandemic, the health insurance penetration in our country is very low. Due to such a low coverage, the cost of insurance becomes high. In order to bring down its cost, GST rate should be reduced to 5 per cent from 18 per cent," Reliance General Insurance CEO Rakesh Jain said.
According to Jain, the deduction for the health insurance premium paid may be increased to Rs 100,000 to induce people to take adequate cover. Further, deduction of health insurance premium under Section 80D should also be allowed under the new tax regime.
The benefit of a reduced tax rate of 10 per cent on long-term capital gain (LTCG) above Rs 100,000 should also be extended to the insurance sector. Also, premium paid for home insurance against the risk of various disasters should be given as a tax incentive by way of deduction under Chapter VI A to promote home insurance, he added.
Additionally, 5 per cent GST is charged on room rents exceeding Rs 5,000 per day by clinical establishments. Insurance companies, while settling health insurance claims, are required to include such GST in the settlement amount. A clarification is required as to whether such GST is available as Input Tax Credit to insurance companies, he said.