The insurance industry wish-list has been largely the same for the last 4-5 years with the aim of driving insurance penetration in the country. A few of our recommendations include:
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. So, we recommend that 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.
Alternatively, if we could have a separate bucket for pensions in the range of Rs. 50,000-75,000/- that would help to level the playing field with NPS.
The current limit of health premium (including preventive medical check-up costs) under Section 80D is only Rs. 25,000/- and needs to be increased. The last two years of Covid have proven that the current limit is not enough, and they need to significantly increase the limit. Whatever is said and done, people do buy life and health insurance for tax-saving purposes, so we do need to give them a hook of a higher deduction limit.
As per a budget announcement a couple of years ago, for ULIPs with an aggregated premium amount of Rs. 2.5 lakh p.a or more, the maturity amount, which was earlier tax-free under Section 10(10D) of the Income Tax Act, became taxable. This should be reversed as it disincentivises big ticket investments.
Section 80C of the Income Tax Act is currently cluttered with several investment options such as life insurance premium, PPF, ELSS, NSC, NPS, principal on home loan amongst others. If you are a salaried employee, most of it goes into EPF and PF. So, we would recommend a separate bucket for life insurance policies or an increase in the limit from Rs. 1.5 lakh to Rs. 2-2.5 lakh. Atleast a separate section for Term policies would be helpful given the huge protection gap in the country.
Raising the 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.
We recommend zero-rated GST for protection products as 18% GST makes the term plans costlier. To increase insurance penetration in the country, the basic protection plans should made available under zero-rated GST.