What Insurance Experts Expect

As the Lok Sabha Elections approach, all eyes are on the Finance Minister, Nirmala Sitharaman, and her upcoming budget announcement. On February 1, 2024, the finance minister will present Budget 2024. Among those eagerly waiting are leaders from the insurance industry, who are hopeful for some positive changes.

The government will unveil Budget 2024 in less than a month, and insurance experts are optimistic that their longawaited requests, particularly regarding the taxation of different insurance schemes, will be considered. The Insurance Regulatory and Development Authority of India (IRDAI) has a vision of “Insurance for all by 2047” to boost insurance penetration across the country. Here’s what insurance experts are expecting in the upcoming budget.

 Enhanced Tax Benefits for Retirement Planning

Retirement planning is crucial for everyone, regardless of income, to ensure a steady income postretirement. Currently, you can save up to Rs. 50,000 in taxes through the National Pension Scheme (NPS). However, this benefit does not extend to other pension and annuity schemes. Insurance experts believe that offering more tax exemptions on annuity and pension plans will encourage more individuals to invest in these schemes to reduce their tax liabilities.

The Managing Director and CEO of Aegon Life Insurance echoed this sentiment, stating, “The current Rs. 50,000 tax exemption for NPS under Section 80CCD(1B) should also apply to pension and annuity plans to encourage more people to use them.”

 Separate Tax Exemptions for Term Insurance Plans

Under Section 80C of the Income Tax Act of 1961, individuals can save up to Rs. 1,50,000 in taxes through investments in instruments like Public Provident Fund (PPF), Life Insurance, National Savings Certificate (NSC), EquityLinked Savings Scheme (ELSS), and Sukanya Samriddhi Yojana, among others. Insurance industry experts hope that Budget 2024 will introduce separate tax exemptions for term insurance plans. This move could encourage more people to purchase term insurance plans with higher coverage, offering better financial security.

 Making Life Insurance Premiums Completely TaxFree

Another significant expectation from insurance leaders is for the premiums paid towards life insurance plans to be made completely taxfree. They believe that if more tax exemptions are provided, the number of individuals purchasing life insurance plans will increase significantly.

 Reduction of GST on Insurance Products

Insurance experts are also hopeful that the Goods and Services Tax (GST) on specific insurance schemes will be reduced to make them more affordable. Sathishwar B, MD and CEO of Aegon Life, suggested that ‘zero rating’ should be implemented for certain policies, such as Pradhan Mantri Jeevan Jyoti Bima Yojana and NPS, to encourage more people to buy these policies.

 Summary of Key Expectations

Tax Benefits for Retirement Planning: Extend the Rs. 50,000 tax exemption available under NPS to other pension and annuity plans to encourage more investment in these schemes.
Separate Tax Exemptions for Term Insurance: Introduce specific tax exemptions for term insurance plans under Section 80C to increase their uptake.
Life Insurance Premiums TaxFree: Make premiums paid towards life insurance plans completely taxfree to boost the number of policyholders.
GST Reduction on Insurance Products: Lower the GST on insurance products, especially for policies like Pradhan Mantri Jeevan Jyoti Bima Yojana and NPS, to make them more accessible.

 Why These Changes Are Important

The primary goal behind these expectations is to increase insurance penetration across India. By offering more tax benefits and reducing the cost of insurance products, more people will be encouraged to invest in various insurance schemes. This not only provides financial security to individuals but also contributes to the overall economic stability of the country.

 The Role of Insurance in Financial Planning

Insurance plays a crucial role in financial planning by providing a safety net against unforeseen events. Whether it's life insurance, health insurance, or pension plans, these products offer financial protection and peace of mind. By making insurance more accessible and affordable, the government can ensure that a larger portion of the population is adequately covered.

The Impact of Increased Insurance Penetration

Increased insurance penetration can have several positive effects on the economy:

1. Enhanced Financial Security: More people will have access to financial protection, reducing the economic impact of unexpected events.
2. Encouragement of Savings: Insurance products often come with savings components, encouraging people to save more for the future.
3. Economic Stability: With more people insured, there will be less financial strain on individuals and families during emergencies, leading to greater economic stability.
4. Investment in the Economy: Premiums collected by insurance companies are often invested in various sectors, contributing to the overall growth of the economy.

As we await the announcement of Budget 2024, the insurance industry is hopeful for significant reforms in the existing taxation scheme on insurance plans. The expectations outlined above are aimed at making insurance more accessible and encouraging more people to invest in various insurance products. With these changes, the vision of “Insurance for all by 2047” can become a reality, providing financial security to millions across the country.

Stay tuned to our easybima website for regular updates on the upcoming budget and its implications for the insurance industry.

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