Union Budget July 2024: Satishwar B., MD and CEO, shares his Budget Wishlist

Our journey towards 'Insurance for All by 2047' is marked by strategic steps, and certain recommendations for the upcoming Budget could pave the way for growth and accessibility in the Life Insurance Sector:

1.  No Taxation for Annuity Plans to Benefit Both Retirees and the Industry: Many Indians don't save enough for retirement, and the gap between needed and available retirement funds is expected to reach $85 trillion by 2050. To help close this gap, consider these steps:

• Investing in pension and annuity products is crucial for income after retirement. Making taxes simpler or removing them for these products will encourage more people to invest in these important financial protections.
• Pension policies, like the NPS, provide a steady income in retirement. It's important to lessen the tax load for people receiving pensions from the National Pension System (NPS), as the retirement fund gap is expected to increase a lot. The current ₹50,000 tax exemption for NPS under Section 80CCD(1B) should also apply to pension and annuity plans provided by life insurance companies to encourage more people to use them.

2. Improving Tax Benefits to Increase Insurance Coverage: India faces a severe issue with inadequate insurance. When a family's primary earner passes away, the money left for the survivors to live and settle debts is usually less than nine percent of what's actually needed .

• Separating Savings for Life and Health: Changing tax sections 80C and 80D to provide separate tax breaks for the life-threatening risk part of term life plans could help close the gap in death risk coverage and enhance social security.
• Complete Deduction for Life Insurance Premiums: Permitting individuals to deduct the entire amount paid for Term life insurance premiums from their taxable income, without any decrease due to claims made under other sections, such as 80C, will encourage more people to buy insurance. This means they get the full tax benefit for their insurance premiums, making insurance more financially appealing.

3. GST Reforms for Wider Reach: Insurance is not a luxury but a necessity. In India, adequate social security measures are still evolving, so insurance serves as a vital safety net - providing financial protection to families in times of illness, accidents, or the loss of a breadwinner. Not being able to afford insurance can leave families vulnerable to financial crises in times of need.

The imposition of an 18% Goods and Services Tax (GST) on life insurance in India can deter individuals and families from securing essential life coverage. Lowering the GST on term life insurance and applying a 'Zero rating' –which means setting the tax rate to 0%— By effectively removing the tax without sacrificing tax benefits for businesses, this policy aims to enhance financial security for more citizens. It will promote financial inclusion and facilitate greater participation in insurance schemes across society, empowering Indians with the means to mitigate financial risks.

Overall, the affordability and accessibility of insurance should be prioritised in order to take a significant step towards building a financially inclusive society where every individual has the opportunity to secure their financial future.

A Collaborative Future Ahead

As we progress, the collective efforts of the life insurance industry, including Bandhan Life, are crucial in shaping a more secure financial future for individuals across the nation. With data enablement as the driving force behind this insurtech revolution, we can expect many more innovations soon. Databases such as Aadhaar, Income Tax Portal, and Account Aggregator Network are already helping insurers with digital underwriting. The Ayushman Bharat Health Account (ABHA) can also be a significant enabler for life insurance companies.

With ongoing support from regulatory bodies and anticipated policy reforms, insurers are committed to extending our reach and impact, making insurance a fundamental part of every Indian household’s financial plan. Together, we’re not just insuring lives; we’re securing futures and building a new world.

Also published in Hindu Business Line:   https://www.thehindubusinessline.com/economy/budget-wishlist-life-insurers-push-for-nps-tax-benefits-on-their-pension-and-annuity-products/article68336184.ece