Union Budget 2020 needs to launch about proposed measures to make insurance policies higher affordable and consumer-friendly, insurance companies have requested. According to the Indian Insurance Regulatory and Development Authority (IRDAI) annual report, insurance penetration of India remains one of the lowest at 3.70 percent in 2018.
Minister for Finance of the Union Nirmala Sitharaman will declare the 2020 Budget on February 1. From an enormous maximum tax payable to the implementation of a new provision for the premium paid on individual life funds — here are insurance industry forecasts from the upcoming budget.
Nirmala Sitharaman wants the insurance industry to bridge the gap between taxing pension policies issued by life insurance companies and pension products under the National Pension Scheme (NPS). The Life Insurance Council also proposed additional tax incentives of around 50,000 more than the 80C ceiling on investments in pension plans.
If a life insurance company enters a pension plan, the pension fund fee is deductible under section 80CCC and Section 80CCE's total cap of some 150,000. In order to encourage investment to NPS, a new sub-section (1B) has been added pursuant to Section 80CCD of the Income Tax Act enabling an additional deduction of some 50,000 over and above the 1.5 lakh allowed under Section 80CCE of the Act.
To make life insurance policies more than a tax-saving tool, the central government needs to extend an additional deduction of some 50,000 for a premium paid (as available for NPS) to pension policies issued by life insurance companies, S N Bhattacharya, Secretary, Life Insurance Council said.
Kamlesh Rao, MD & CEO, Aditya Birla Sun Life Insurance, added that adding a separate deduction of some 50,000 first-time life insurance customers and an additional capping of somewhere around 50,000 for someone buying a mere cover (term) scheme would place life insurance on a fast track.
Life insurance policies must follow the dual criteria of both providing protection and long-term benefits. Nirmala Sitharaman has also been approached by players in the insurance industry to make a simple provision for the premium paid on individual life policies.
"It would be beneficial to abolish life insurance rates under Section 80C and create a separate category for the same one. This would allow policyholders the ability to diversify their savings through various life insurance policies in order to meet their life insurance targets while making use of tax exemption," said Sanjay Tiwari, Director, Policy, Exide Life Insurance.
"The government should either consider a separate deduction section or increase it to a maximum of 3,00,000 under Section 80C of the Income Tax Act, 1961, as the current limit of 1.50,000 is too low to cover all its contributions," said Tarun Chugh, MD & CEO, Bajaj Allianz Life.
Another major move would be to encourage women to save their lives and protect their lives. An important step will be to offer additional tax gain for women policyholders.
"In addition, relaxation of section 10(10)(D), where minimum guaranteed amount is expected to be 10 times the annual premium, will be a good move, paving the way for growth for the LI market, in addition to increasing the safety net of the people of the nation at very low cost," said Kamlesh Rao, MD & CEO, Aditya Birla Sun Life Insurance.
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