Curiosity funds kind the largest chunk of presidency spending at 20 p.c
Funds bulletins are essential for the life insurance coverage sector, however the previous couple of left it with a dampened spirit, comparable to when the Finance Minister declared the withdrawal of tax-free standing to maturity proceeds of investment-cum-insurance insurance policies.
Regardless of Finance Minister Nirmala Sitharaman ruling out any spectacular bulletins this time spherical, given it’s an interim price range, business gamers proceed to hope for optimistic surprises.
For example, Unit-linked life insurance coverage insurance policies (Ulip) with combination annual premiums of over Rs 2.5 lakh got here within the line of fireplace in 2021, adopted by conventional endowment insurance policies with annual premiums of over Rs 5 lakh in 2023. To begin with, life insurance coverage officers are hoping that there gained’t be any such shock in retailer this yr.
Additionally learn: Union Funds 2024 and the taxpayer: Increased primary exemption limits, extra medical deductions wanted
Chill out the Rs 5-lakh premium cap on tax-free maturity proceeds
In Funds 2023, the life insurance coverage business suffered a blow within the type of the withdrawal of tax-free standing to maturity proceeds of high-value endowment insurance policies. From April 1, 2023, maturity proceeds of recent conventional insurance policies with an combination annual premium of over Rs 5 lakh stopped having fun with this vital tax profit.
Life insurers are hoping that the federal government will loosen up this rule. “The business has been in search of a assessment of the Rs 5 lakh cap and urging the federal government to think about rising it to Rs 10 lakh. We may even see some adjustments on that entrance,” says Sumit Rai, MD and CEO, Edelweiss Tokio Life Insurance coverage.
Additionally learn: Funds 2024: What the salaried and the self-employed anticipate from the price range | Merely Save
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Want parity with NPS
The business needs the federal government to take steps to facilitate deeper insurance coverage and pension penetration. Extending NPS tax advantages to insurance coverage firms’ pension insurance policies might help increase pension protection, business officers really feel. At present, other than deductions of as much as the general 80C restrict of Rs 1.5 lakh, NPS funding additionally enjoys a further tax break of as much as Rs 50,000 beneath part 80CCD (1B). Employers’ contribution to staff’ NPS of as much as 10 p.c of their primary pay can be allowed as a deduction.
“With a big variety of individuals heading in the direction of retirement age within the subsequent decade, incentivising the acquisition of merchandise within the pension class turns into essential on this interim price range. Life insurance coverage annuity or pension merchandise needs to be aligned with the Nationwide Pension Scheme (NPS). We additionally advocate for a further deduction of Rs 50,000 or extra,” says Tarun Chugh, MD and CEO, Bajaj Allianz Life Insurance coverage.
Tax-free standing to annuity earnings
This has been a long-standing demand of the life insurance coverage business, which offers annuities not just for life insurance coverage pension insurance policies but additionally for the Nationwide Pension System’s (NPS) 40 p.c corpus that must be transformed into annuities. Trade officers imagine abolishing tax on annuities will assist retirees in addition to the pension sector.
“Many Indians don’t save sufficient for retirement, and the hole between wanted and out there retirement funds is anticipated to achieve $85 trillion by 2050. Investing in pension and annuity merchandise is essential for earnings after retirement. Making taxes easier or eradicating them for these merchandise will encourage extra individuals to put money into these essential monetary safety plans,” says Satishwar B, MD and CEO, Aegon Life Insurance coverage.
Separate deduction for time period insurance policies, additionally beneath new regime
India’s penetration, regardless of the rising consciousness and efforts by the regulator, authorities, and different stakeholders, continues to be low at 4 p.c.
“India faces a extreme problem of insufficient insurance coverage, that’s, when a household’s main earner passes away, the cash left for the survivors to reside and settle money owed is often lower than what’s really wanted. So, we request the federal government to think about introducing a separate tax deduction restrict for time period life insurance coverage beneath the previous tax regime, as the present Part 80C additionally covers different tax-saving merchandise,” says Prashant Tripathy, MD and CEO, Max Life Insurance coverage.
Given the indispensability of safety cowl, he feels deduction on life insurance coverage also needs to be allowed beneath the brand new, minimal exemptions regime.