Budget 2024:

Budget 2024: Amrit Kaal's first budget – Budget 2023 - was practically perfect in many ways, with the financial services industry named as one of the top seven objectives. It was suggested to make the IFSC a more desirable location, exempt certain NBFCs from thin capitalization, and provide investors with relief by maintaining the current capital gains system.

The life insurance industry was, on the other hand, in for a rude awakening. To prevent India's wealthy individuals from misusing life insurance as an investment vehicle, FM Nirmala Sitharaman announced the levy of taxed on maturity benefits if the aggregate annual premium for all policy purchases above Rs 5 lakh, which came into effect from April 1, 2023.

In the upcoming interim budget, there are several expectations from the insurance sector. Some of these include a revisit of GST rates on insurance premiums. The insurance sector anticipates and strongly endorses an increased limit of tax benefits to stimulate the penetration of insurance in India.

Insurance Sector Expectations from Interim Budget

GST Rates of Insurance Premium - “A relook at the GST rates on insurance premiums is a reasonable expectation from the budget. Social security measures are still evolving in the country. Insurance for all is the need of the hour to protect oneself and dependents from hardships arising from unexpected circumstances,” said Asha Murali, Partner, Actuarial Services, BDO India.
“While tax incentives act as positive nudges to take the right decisions, over the past several years the orientation has been towards simplification of the tax structure and reduction of incentives,” Murali added.

Separate Exemption Category for Term Insurance - The taxation system regarding insurance needs to be reconsidered in order to achieve a fair balance. Currently, the maximum deduction limit of Rs 1,50,000 under Section 80 C is often exceeded due to other allowable expenses like PPF and loans. A separate exemption category dedicated to term insurance should be established to address this issue, said Santosh Agarwal, Chief Business Officer – Life Insurance, Policybazaar.com

Tax-Free Annuity Income to Boost Retirement Planning – According to Santosh, it's important to ensure that pension products receive the same tax treatment as the National Pension Scheme (NPS) to address this issue. “This would create a level playing field and make these products more attractive for long-term financial planning.”
“We suggest considering a tax-free status for annuity income derived from these products. This would incentivise people to secure their retirement and align pension products with prevailing tax norms.”

Enhancing Benefits Under Section 80D for Health Insurance – He also bet for improving benefits for health insurance. "One possible solution is to increase the maximum deduction limit for individuals, spouses, and dependent children to Rs 50,000, and for senior citizen parents to Rs 1,00,000,” Agarwal added.

Source:- ETnow news