Scrapping or slashing of Goods and Services Tax (GST) on insurance premiums, making pension/annuity proceeds tax-free, and creating a separate category for tax deduction for premium paid are some of the budget wishlist of Indian insurers
The industry players are also expecting the Indian government to introduce the Insurance Laws (Amendment) Bill 2022, which is also expected to lead to the industry’s growth
Chennai/Mumbai:
With 2024 being the Lok Sabha election year, Indian insurers are expecting more tax concessions for their policyholders from Finance Minister Nirmala Sitharaman, so that industry can also prosper.
Scrapping or slashing of Goods and Services Tax (GST) on insurance premiums, making pension/annuity proceeds tax-free, and creating a separate category for tax deduction for premium paid are some of the budget wishlist of Indian insurers.
The industry players are also expecting the Indian government to introduce the Insurance Laws (Amendment) Bill 2022, which is also expected to lead to the industry’s growth.
The wishlist of the general insurers are majorly two – reduction of GST so that health insurance becomes affordable, and higher IT deduction for health insurance premium.
“In spite of pandemic, the health insurance penetration in our country is very low. Due to such a low coverage, the cost of insurance becomes high. In order to bring down its cost, GST rate should be reduced to 5 per cent from 18 per cent,” Reliance General Insurance CEO Rakesh Jain said.
According to Jain, the deduction for the health insurance premium paid may be increased to Rs 100,000 to induce people to take adequate cover. Further, deduction of health insurance premium under Section 80D should also be allowed under the new tax regime.
The benefit of a reduced tax rate of 10 per cent on long-term capital gain (LTCG) above Rs 100,000 should also be extended to the insurance sector. Also, premium paid for home insurance against the risk of various disasters should be given as a tax incentive by way of deduction under Chapter VI A to promote home insurance, he added.
Additionally, 5 per cent GST is charged on room rents exceeding Rs 5,000 per day by clinical establishments. Insurance companies, while settling health insurance claims, are required to include such GST in the settlement amount. A clarification is required as to whether such GST is available as Input Tax Credit to insurance companies, he said.
Anup Rau, MD & CEO, Future Generali India Insurance said,“100% FDI will help insurers to infuse fresh capital into the system and secure the next two decades of growth. The Indian economy and the insurance market are both tempting to insurers overseas.” .
The number of insurers in India is infinitesimally small, compared to our global peers. Part of the problem is the challenge for global Insurers to find suitable local partners. With over 60 insurers between life and general insurance and a large number of them joint ventures, there is really an acute shortage of local partners, who either have the ability or the inclination to get into this space, lamented Rau
“One can’t over state how critical permitting 100% FDI is- it’s a lot easier (or less politically sensitive) for the administration to increase the FDI limit to 100% than it was to increase from 49% to 74%”,” he observed.
Sharad Mathur, MD & CEO, Universal Sompo General Insurance, stated that the insurance industry has been anticipating various reforms in the tax and regulatory space positively boosting penetration in insurance awareness.
“Considering that we are a country of over 1.35 billion, where the majority of it falls in the age group of 25 to 35 years, there is a huge need for protecting one’s life, health and assets, and this task can be better performed by the insurance sector. In this case, it is the social security, insurance inclusion to be enhanced, and further data security cover limits that can be introduced viz cyber insurance. The union budget can support the insurance sector by considering the inclusion of all such benefits and certainly support increasing insurance penetration across India which is low in spite of the many attempts made by all stakeholders” suggested Mathur.
Satish Gidugu CEO, Medi Assist, said,“The industry is expecting the government to reduce the minimum start-up capital requirement for new entrants in the insurance space and introduce composite licensing.
With composite licensing, insurance companies can offer multiple lines of business like life and general insurance under one license. This system can help to increase the penetration of insurance in India by allowing companies to more easily and efficiently offer a wide range of insurance products to customers, he said.
Vivek Nath, Head of India, WTW, said, considering the medical inflation, the budget should consider reduction of the GST applicable on retail insurance to improve insurance coverage.
While there is significant focus on solar and renewable energy, industry in general, is prioritising actions towards a low carbon economy and the budget should outline policy measures that will improve assessment, measurement, mitigation and transfer of climate or climate related risks including via insurance, suggested Nath.
Surjendu Kuila- Co-Founder and CEO, Zopper, suggested,”As this will be the last full budget for the current government, the sector expects some of the much-awaited reforms to see the light of day. These might include increasing tax benefits for the end consumer from Rs 50,000 to Rs1,00,000 and a 100% deduction against medical expenses without any value cap. If introduced, these will boost the entire insurance ecosystem while opening new horizons and helping increase insurance penetration in India.”
Life Insurance
Tarun Rustagi, chief financial Officer, Canara HSBC Life Insurance, said,“ During pandemic, we all experienced first-hand or otherwise how essential it is for every individual to have an adequate insurance cover for ourselves and family. The government should enforce additional tax benefits on life insurance products, which can be in the form of additional tax deduction and/or reduction of GST on term, pension and health products. We can also expect some of the government and regulator initiated plans sold at zero percent GST rate rather simple exemptions to ease out the Input credit process.”
“Incentives like a GST exemption or a reduced GST slab can further help in meeting the needs of consumers. Pension/annuity proceeds should be made tax-free in the hands of policyholders, or a deduction for the principal component should be allowed,” Aegon Life Insurance Managing Director and CEO Satishwar B. said.
He also said, an aggregate deduction of up to Rs 1.75 lakh, for the premiums paid for life and health can be introduced to nurture the ecosystem of insurers, insurtechs, and consumers.
Apart from making pension tax-free, Ageas Federal Life Insurance CEO and MD Vighnesh Shahane said the government should also make the maturity amount under unit linked insurance policies (ULIP), where the annual premium is Rs 2.5 lakh or more, tax free.
“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,” he said.
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, he added.
Listing out other budget wishlist, Shahane said there should be a higher deduction limit in the case of health insurance premium under Section 80D of the Income Tax Act while the current limit is only Rs 25,000.
He also said the Section 80C of the Income Tax Act is cluttered with various investment options for tax benefits, and there should be a separate section for life insurance or the limit be increased from Rs 1.5 lakh to Rs 2.5 lakh.
At least a separate section for term life insurance policies would be helpful given the huge protection gap in the country, Shahane added.
“We recommend zero-rated GST for protection products as 18 per cent GST makes the term plans costlier. To increase insurance penetration in the country, the basic protection plans should be made available under zero-rated GST,” he said.
Raising the tax deducted at source (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, Shahane suggested..
Considering the low single-digit penetration of life insurance in India, tax incentives can be expected to be focused on first-time life-insurers and on the principal component of annuity income. Special incentives may also be announced for women who currently account for barely more than one-third of the country’s life-insurance covers, Edelweiss Tokio Life Insurance Executive Director Subhrajit.
He also said the amendments proposed to the two insurance laws will accelerate the industry’s growth and the Indian government should also consider incentivising investments into life insurance products that will facilitate infrastructure and overall development of the country.
With inputs from IANS