Mumbai: The insurance industry is expecting more tax incentives to increase the penetration of life and general cover among the public in the upcoming Union Budget.
In a pre-budget memorandum, the Life Insurance Council has sought a separate deduction in personal taxes or an increase in the present limit for the premium paid for individual life policies.
Finance Minister Nirmala Sitharaman is scheduled to present the Budget for the financial year 2020-21 on 1 February.
"We request Finance Minister to consider a separate deduction to be provided for a premium paid on individual life policies," Life Insurance Council's Secretary S N Bhattacharya said.
If no separate deduction is provided, the existing limit of Rs 1.5 lakh, under section 80C, should be enhanced to Rs 3 lakh, he said adding, "the existing limit of Rs 1.5 lakh is too crowded with both short-term and long-term investment vying for its share."
Representational image. Reuters.
Aditya Birla Sun Life Insurance's Managing Director and CEO Kamlesh Rao said the introduction of a separate deduction of Rs 50,000 for first-time life insurance buyers and an additional capping of Rs 50,000 for someone purchasing pure protection (term) plan will put life insurance on the fast track.
Rao said lowering GST rate to 12 percent (with input tax credit benefit) will be beneficial for both policyholders and companies.
For a pension plan issued by life insurance companies, an individual contribution to the pension fund is deductible under section 80CCC under the overall limit of section 80CCE of Rs 1.5 lakh.
The Finance Act 2015 inserted a new sub-section (1B) under section 80CCD of the Income Tax Act to encourage investment in National Pension Scheme (NPS) by any individual by allowing an additional deduction of Rs 50,000 over and above the Rs 1.5 lakh available under section 80CCE of the Act.
"It is recommended that in order to reduce the gap between the taxation of pension policies issued by life insurance companies vis-à-vis NPS, the additional deduction of Rs 50,000 for a premium paid (as available for NPS) should be extended to pension policies issued by life insurance players," Bhattacharya said.
Bajaj Allianz Life's Managing Director and CEO Tarun Chugh said both the pension products of life insurance companies and pension products under NPS have a similar objective of building long term savings for meeting retirement goals, hence, the disparity should be addressed by the government in the Budget.
General Insurance Council, the body representing non-life insurance players, has urged the government to reduce goods and services tax (GST) from 18 percent to 12 percent.
"Insurance has become a necessity. In order to encourage risk management among people, there is a need to bring down the GST rate on general insurance products to 12 percent from 18 percent, at present," General Insurance Council's Secretary-General M N Sarma said.
The non-life players have also requested for a tax deduction of Rs 10,000 under income tax for insurance of the residential property. ICICI Lombard GIC chief financial officer and chief risk officer, Gopal Balachandran, said general insurers currently are at a disadvantage as compared to other financial services companies.
While other classes of assesses were provided the benefit of grandfathering of all gains earned on such long terms capital assets up to February 1, 2018, this benefit has not been clarified for general insurance firms.
"This is important for insurers since it will help them in maintaining solvency margins and risk mitigation against catastrophes. This will help insures to provide affordable products and cost-effective solutions to customers," Balachandran said.
According to Star Heath and Allied Insurance Managing Director, S Prakash, there are some products where health insurance companies take more risks and come forward to cover people living with the disease.
"In this segment, there can be a better concession in GST. For senior citizens, there should be an exemption from GST at least for products with a lower sum insured," Prakash said.