GST rate rationalisation from the current rate of 18 per cent on life insurance term policies may also help make life insurance more affordable for the masses, who are keener on buying protection-oriented products, according to Sumit Rai, MD and CEO, Edelweiss Tokio Life Insurance.
“With the experience in the last 2-3 years, it can be viewed as a social necessity to reduce the GST burden, making the category more affordable,’‘ Rai told businessline.
While agreeing with the same, Rai said: “There is a vast ageing population, which underlines the burgeoning pension and annuity market in India. A tax break on annuity could, therefore, be a game changer.”
Currently, annuity is completely taxed in the hands of the customer, which spoils the product’s allure. “Apart from doing away the double taxation (annuities are taxed at entry and exit), the government may also consider extending the tax benefit of ₹50,000 offered on NPS under Section 80CCD (1b), which is over and above the ₹1,50,000-lakh-limit of 80C, to annuities,’‘ he added.
Annuities are the only solution, which provides complete protection from the perspective of living longer (i.e. outliving one’s corpus), by providing a regular flow of income throughout one’s lifetime, purchased in lieu of a single lump-sum amount.
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Life insurers have also been seeking a review of the ₹5 lakh cap and increasing it to ₹10 lakh.
“The life insurance industry has been requesting for a distinct tax deduction limit, specifically for life insurance, with a special emphasis on the term insurance category, apart from the existing 80C provisions. This would serve as an incentive for individuals to invest in life insurance policies and promote a sense of long-term security,’‘ Pankaj Gupta, MD and CEO, Pramerica Life Insurance said.
According to him, IRDAI’s vision of ‘insurance for all’ by 2047 signifies a deep commitment to revolutionise the insurance landscape. The focus is on enhancing the availability, accessibility, and affordability of insurance services for both citizens and businesses, marking a transformative era for the sector.
“From our perspective, we anticipate a year of ongoing change in the insurance sector, characterised by technological advancements, enhanced focus on customer experiences and an increasing emphasis on environmental and social responsibility. Even though the upcoming Budget is a Vote on Account and not a full-fledged Budget, we foresee a continuation of the infra capex and self-dependency themes,’‘ Gupta added.
The first year premium of life insurers declined 7.1 per cent at ₹2,50,274 crore up to December 2023 in the current financial year compared with ₹2,69,190 crore in the same period last year mainly on account of decrease in group premium, according to IRDAI data.