Budget 2022: Insurances ask for separate deduction limit of Rs 1 lakh for premium
Insurance companies are asking for a separate deduction limit of Rs 1 lakh for the payment of insurance premiums under Section 80 C of the Income Tax Act in the upcoming Union Budget to to include more people under the insurance.
Insurers also want to reduce the current 18% Goods and Services Tax (GST) rate on health insurance products to 5% to make such products more affordable for ordinary people.
Finance Minister Nirmala Sitharaman will present the Union budget for 2022-23 on February 1.
“The industry has long awaited policy makers to incentivize people to purchase life insurance by providing a separate deduction limit of at least Rs 1 lakh for payment of insurance premiums under Section 80C” said Tarun Rustagi, CFO of Canara HSBC OBC Life Insurance.
Life insurance is a long-term solution, unlike other financial products which have a shorter investment horizon and are covered by the 80C provision.
Currently, all financial purchases are clubbed under the same IT deduction section (80C) capped at Rs 1,50,000.
“We expect the budget to consider creating a separate section for the tax deduction on premiums paid for life insurance. This would allow for a more logical separation of client funds into long-term and short-term pools” , said Subhrajit Mukhopadhyay, executive director of Edelweiss Tokio Life Insurance. noted.
Managing Director and CEO of Ageas Federal Life Insurance Vighnesh Shahane said Section 80 C is currently crowded with several investment options such as Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS) and the National Savings Certificate (NSC), among others.
“At least a separate section for term policies would be useful considering the current scenario and the huge protection gap in the country,” Shahane said.
Future Senior Vice President of Generali India Life Insurance and Head of Products and Development, Chinmay Bade, said life insurance is a substitute for social security in the event of a person’s death as well as in the event of survival and therefore the exemption limit of 1.5 lakh under Section 80C needs an overhaul.
According to IRDAI’s 2020-21 annual report, insurance penetration in the country is 4.2% of GDP compared to a global average of 7.4%. In March 2021, non-life insurance penetration stood at just 1%.
Roopam Asthana, CEO and full-time director of Liberty General Insurance, said that due to the uncertainty caused by the COVID-19 pandemic, health insurance has become a daily need to protect against uncertainties and is more relevant than ever.
“Therefore, the government should consider a drastic reduction in the applicable GST on health insurance premiums which is currently charged at 18%. This will encourage people to purchase additional health insurance and supplemental plans to protect against crises and medical emergencies,” Asthana noted.
Managing Director and CEO of Bajaj Allianz General Insurance, Tapan Singhel, believes that the price of premium versus coverage plays a vital role in customers’ purchasing decision. With the 18% GST applied to health insurance, the price of the premium increases, which becomes a deterrent to people opting for sufficient coverage, he noted.
According to Shanai Ghosh, Executive Director and CEO of Edelweiss General Insurance, health protection is paramount and therefore health insurance should be seen as an essential good.
“I would therefore ask the Minister of Finance to consider reducing the GST for health insurance from the current 18% to the lowest slab of 5%. This decision will also make health policies more affordable and will increasingly push more people buying health coverage,” Ghosh said.
Niva Bupa Health Insurance Autonomous Actor Krishnan Ramachandran, CEO and Managing Director (MD) of Niva Bupa Health Insurance, suggested that the government consider doubling the health insurance cap under section 80D to 50,000 rupees in light of higher medical expenses after COVID.
Echoing similar sentiments, Raheja QBE General Insurance MD and CEO Pankaj Arora said that to encourage more people to purchase health insurance and to ensure they purchase the appropriate amount of coverage, tax exemptions on 80D section income should be increased, ideally doubled.
According to the CEO of Reliance General Insurance, Rakesh Jain, for the Union Budget 2022, the government should consider consolidating health facilities, such as diagnostic centers, specialty hospitals, wellness facilities, into the “infrastructure” category.
“It will bring in funding from large institutions, including insurance companies that seek and have a regulatory obligation to invest in ‘infrastructure assets,'” he said.
The insurance and health sectors must evolve together to improve access to quality and affordable health care for the masses, he said.
Rohit Jain, head of Willis Towers Watson (India), said the insurance industry in India was recovering from a difficult year in which life and health insurance claims increased in due to the pandemic.
Understandably, the industry has pushed for direct and indirect tax relief, primarily to cushion the impact of the pandemic, but also to improve penetration and increase the speed of insurance influence, he said. declared.
“Having said that, it would be a tightrope for the government to maintain fiscal prudence balancing these expectations with the general health of the Treasury, particularly given the potential public health-related expenditure in managing the pandemic itself.” , added Jain.