As the Union Budget 2024-25 approaches, life insurers advocate for tax deductions on annuities and a reduction in the Goods and Services Tax (GST) rates applied to their various products. Annuity plans are pivotal in providing steady post-retirement income. Eliminating taxes on these plans would encourage retirees to secure their futures more robustly. Extending tax exemptions to encompass pension and annuity plans from life insurance companies could further bolster retirement savings.In the Union Budget 2023-24, Finance Minister Nirmala Sitharaman abolished the tax-free status granted to the maturity proceeds of endowment policies. This move came as a shock to the insurers and they were hoping for some relaxation on this front. Separate tax benefits for term life and health insurance under Sections 80C and 80D would help address coverage gaps and enhance social security. Permitting full deductions for term life insurance premiums from taxable income, without reductions due to claims under other sections, would incentivize more individuals to invest in essential coverage.Says Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Company (FGILI): “Removing the GST burden on life insurance would make these critical products more accessible and affordable, promoting wider participation and enhancing financial security across society. Revisiting the deductions allowed under Section 80C of the Income-tax Act, 1961, within the current tax regime can offer individuals more flexibility and better incentives to invest in their financial security.”“These reforms can significantly strengthen financial security and inclusivity in India. The insurance sector remains hopeful that the upcoming budget will prioritize these changes, fostering growth and accessibility in the industry,” says Kumar. According to experts, the insurance industry is hopeful that the Budget 2024 will introduce reforms to enhance tax incentives and expand insurance coverage. “Key expectations include increasing the tax deduction limit for health and life insurance premiums under Section 80C from Rs 1.5 lakh to Rs 2 lakh, allowing full tax deductions for premiums, and eliminating the five-year minimum term for tax benefits. Additionally, reducing GST on insurance products and introducing new deductions for personal accident policies could significantly boost insurance penetration. Such measures are crucial for promoting comprehensive insurance coverage, ensuring financial security, and addressing the rising cost of living for the middle class,” says Sharad Mathur, Managing Director & Chief Executive Officer, FGILI. “As an industry, one of our budget expectations from the finance ministry is to consider lowering GST on life insurance products. Additionally, in the pension products category, to secure the post-retirement financial needs of individuals, we urge the government to align life insurance annuity or pension products with the National Pension Scheme (NPS) and allow a similar additional deduction of Rs 50,000 or more for life insurance annuity or pension products under income tax,” says Tarun Chugh, MD & CEO, Bajaj Allianz Life Insurance. According to experts, one of the key expectations is that pension products like annuity plans should be given the same tax benefits as NPS as the current taxation does not encourage investment in retirement planning. “It’s also necessary to expand Section 80C deductions and add a dedicated category for term insurance because the existing limit of Rs. 1,50,000 is insufficient for essential financial investments. The industry also advocates a reduction of GST rates on health and term products from 18 per cent to five per cent which will make them more cost-effective and increase their overall appeal. There’s also a need for an increase in the tax deduction limit for health insurance premiums, proposing a raise to Rs 50,000 for individuals, their spouses, and dependent children, and to Rs 1 lakh for senior citizen parents,” says Tarun Mathur, chief business officer (CBO), Policybazaar.com. Karthik Chakrapani, Chief Business Officer, Pramerica Life Insurance said that their primary objective was ‘achieving insurance for all by 2047.’ “We are expecting the implementation of a specific tax deduction limit for life insurance, more so for term insurance, traditional participating and non-participating insurance, along with existing 80C benefits. We expect these measures to encourage people to invest in life insurance.” These proposed changes are expected to bring in more insurance penetration and appeal to life insurance products.
sekar nallalu Budget,Cryptocurrency,Insurance Budget 2024: Life Insurers Advocate For Tax Deductions On Annuities And A Reduction in GST