The Union Budget is an annual event that aims at addressing the broad expectations of industry and commerce, with the aim of benefiting the country‚Äôs populace. For the life insurance sector, in particular, the time is now right for the budget to introduce measures and benefits that aid the objective of the industry i.e. to protect the financial future of citizens. Our hopes from the budget would hence be with regards to promoting three key elements;
Elimination of GST on protection premium
In an under-insured industry which is increasingly aligning its mandate of ensuring protection for all, it would be worthwhile to look at 0% GST tag for term products, critical illness products and premium related to protection cover across all life insurance policies. Protection is still not a pull product for the large majority of Indians, and it is important to provide an incentive to create a pull for higher protection cover for Indian households.
Boosting tax exemption limits under Section 80C
Life insurance is essential to create a secured society. The Finance Minister should consider increasing the current limit of Rs. 1.5 lakh to the tune of 2.5 lakh to give a good push to behavior change. Creating a separate category within 80C for long term savings and protection instruments will be an even better solution to heighten interest in the overall category.
Incentivizing retirement planning for financially independent golden years
In our country, the population above 60 years is constantly rising and by 2030 12.5% per cent of the total Indian population will be above 60 years. Where life expectancy continues to grow at a steady pace, on one hand, the level of social security continues to be abysmal on the other hand. We would expect the budget to take into consideration measures that encourage retirement planning. The same must be incentivized by bringing parity in retirement products and NPS by including all retirement products under section 80CCD, therefore additional tax benefits available to NPS should be extended to retirement products as well. In addition, the Finance Minister should consider increasing the tax exemption limit in this category to Rs.1 lakh from the current Rs. 50,000 and completely exempting annuities from income tax. This would ensure a greater stream of defined income in retirement years enabling financial independence for retirees.
(By, Prashant Tripathy, Managing Director & CEO, Max Life Insurance)