Insurance companies are aiming for a separate deduction limit of Rs 1 lakh for paying insurance premiums under Section 80C of the Income Tax Act in the upcoming Union budget to bring more people under the insurance coverage.
The insurers also want an 18 percent cut in the goods and services tax (GST) rate currently applied to health insurance products to 5 percent 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 the expectations of the policy makers to incentivize people to buy life insurance by giving a separate deduction limit of at least Rs 1 lakh for the payment of insurance premiums below section 80C,” said Tarun Rustagi Chief Financial Officer Canara HSBC OBC Life Insurance.
Life insurance is a long-term solution, unlike other financial products that have a shorter investment horizon and fall under the 80C provision.
Currently, all financial purchases fall under the same IT deduction section (80C) with a maximum of Rs 1,50,000.
Subhrajit Mukhopadhyay, executive director of Edelweiss Tokyo Life Insurance: “We expect the budget to consider creating a separate section for tax deductions on life insurance premiums paid,” said.
Ageas Federal Life Insurance Managing Director and CEO Vighnesh Shahane said Section 80 C is currently full of various investment options such as Public Provident Fund (PPF), Equity-Linked Savings Scheme (ELSS) and National Savings Certificate (NSC).
“In any case, a separate term policy section would be helpful given the current scenario and the huge protection gap in the country,” Shahane said.
Future Generali India Life Insurance Senior VP and Head Products and Development Chinmay Bade said that life insurance is a proxy for social security in the event of a person’s death and survival and therefore the exemption limit of 1.5 lakh under section 80C needs a review.
According to IRDAI’s Annual Report-2020-21, insurance penetration in the country stands at 4.2 percent of GDP compared to a global average of 7.4 percent. As of March 2021, the penetration of non-life insurance was barely 1 percent.
Roopam Asthana, CEO and managing director of Liberty General Insurance, said that with the uncertainty caused by the Covid-19 pandemic, health insurance has become a daily necessity to protect oneself from uncertainties and is more relevant than ever.
“As a result, the government should consider a drastic cut in the GST applicable to health insurance premiums, which are currently charged at 18 percent. This will encourage people to purchase health insurance and additional supplemental plans to help themselves. protect against medical crises and emergencies,” Asthana noted.
Bajaj Allianz General Insurance Managing Director & CEO Tapan Singhel believes that premium over coverage plays a vital role in the purchase decision for customers. With the 18 percent GST applied to health insurance, the premium goes up, becoming a deterrent to people opting for adequate coverage, he noted.
According to Shanai Ghosh, Executive Director and CEO of Edelweiss General Insurance, protecting health is paramount and therefore health insurance should be seen as an essential commodity.
“I would therefore ask the Secretary of the Treasury to consider lowering the GST for health insurance from the current 18 percent to the lowest bracket of 5 percent. This move will also make health policies more affordable and encourage more and more people to adopt a health insurance,” Ghosh said.
The Standalone Health Insurance Player Niva Bupa The CEO and General Manager (MD) of Niva Bupa Health Insurance, Krishnan Ramachandran, suggested that the government should consider doubling the medical insurance limit under Section 80D to Rs 50,000 in the light of higher medical costs after COVID.
Echoing similar sentiments, Raheja QBE General Insurance MD and CEO Pankaj Arora said that to encourage more people to buy health insurance and to ensure they buy the right amount of coverage, Section 80D income tax exemptions should be increased, ideally doubled.
According to Rakesh Jain, CEO of Reliance General Insurance, the government should consider placing healthcare facilities, such as diagnostic centers, specialty hospitals and wellness facilities, under the “infrastructure” category for the Union’s 2022 budget.
“This will bring funding from large institutions, including insurance companies that are seeking and legally required to invest in ‘infrastructure assets,'” he said.
The insurance and health care sectors must evolve together to improve access to quality and affordable health care for the masses, he said.
Rohit Jain, head of India’s Willis Towers Watson, said India’s insurance industry is recovering from a difficult year in which life and health insurance has skyrocketed due to the pandemic.
Understandably, the industry has pushed for direct and indirect taxes, primarily to cushion the effects of the pandemic, but also to improve penetration and increase the rate of insurance impact, he said.
“That said, it would be difficult for the government to maintain fiscal prudence by balancing these expectations with the overall health of the treasury, especially given potential public health-related expenditures in managing the pandemic itself,” Jain added. .
(Except for the headline, this story has not been edited by DailyExpertNews staff and has been published from a syndicated feed.)