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Ahead of the upcoming Budget from the Modi 3.0 government, private life insurers are advocating for tax parity between life insurance annuity or pension products and the National Pension System (NPS).
There is also need for separate income tax deduction window for premium paid on term insurance policies, they have suggested.
Also, individuals must be permitted to deduct the entire amount paid for Term life insurance premiums from their taxable income, without any decrease due to claims made under other sections, such as 80C, several Chief Executives of private life insurers told businessline.
LTCG taxation
Interestingly, there is also now suggestion to the Finance Ministry to introduce long-term capital gains (LTCG) taxation for all high value traditional life insurance plans (more than ₹5 lakh aggregate annual premium), in line with high value Unit Linked Insurance Plans (ULIPs).
Tarun Chugh, Managing Director & CEO, Bajaj Allianz Life Insurance, said that introduction of LTCG for all high value traditional life products will bring in uniformity and tax efficiency for insurance customers at par with other similar financial products in the market.
On pension products, Chugh said that government must align life insurance annuity or pension products with the NPS and allow the similar additional deduction of ₹ 50,000 or more for life insurance annuity or pension products under income tax. Chugh also wanted the Finance Ministry to consider lower GST rate on life insurance products.
Prashant Tripathy, MD & CEO, Max Life Insurance | Photo Credit: KAMAL NARANG
Prashant Tripathy, Managing Director & CEO, Max Life Insurance, said: “To enhance social and financial security, it is important to introduce a separate deduction for Life Insurance policies, especially Term insurance policies, under Section 80.
Additionally, bringing the pension products of Life insurance companies on par with the NPS by allowing tax deductions of ₹ 50,000 under Section 80CCD will also be a strategic move towards incentivizing long-term financial planning for retirement and will align with broader financial inclusion goals, making vital coverage more affordable for a wider demographic.”
Satishwar B., Managing Director and CEO, Bandhan Life, said that investing in pension and annuity products is crucial for income after retirement. “Making taxes simpler or removing them for these products will encourage more people to invest in these important financial protections”, he said.
Rakesh Jain, CEO, Reliance General Insurance | Photo Credit: SHASHI ASHIWAL
The current ₹50,000 tax deduction for NPS under Section 80CCD(1B) should also apply to pension and annuity plans provided by life insurance companies to encourage more people to use them, he added.
Satishwar said that permitting individuals to deduct for tax purposes the entire amount paid for Term Life insurance would mean they get the full tax benefit for their insurance premiums, making insurance more financially appealing.
S.K.Sethi, Co-Chair, PHDCCI’s Banking & Financial Services and Insurance Committee said that tax breaks on the pension products sold by life insurers should be better than those available for NPS. This will help increase the popularity of pension products and help the government in investments in infrastructure projects in a big way in the coming five years, he added.
HEALTH INSURANCE
Rakesh Jain, CEO, Reliance General Insurance, said the government must in the Budget increase the upper limit for tax exemption on health insurance premiums to ₹75,000. Also, health insurance must be mandated to all employers for their employees to bring holistic protection to the working class.
Prasun Sikdar, Managing Director & CEO, ManipalCigna Health Insurance, said that the Budget must announce higher allocation of funds for healthcare compared to what was proposed in Interim Budget to meet the targets of the National Health Policy. He also urged the government to reduce the current 18 per cent GST rate on essential service like health insurance.
“Lowering the GST burden on the health insurance premiums will be a huge respite for missing middle and senior citizens to get access to good quality healthcare they need and help to significantly boost insurance penetration across India by driving affordability,” Sikdar said.
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