There is a tangible sense of excitement about the budget 2024, particularly in the health insurance sector. The interim budget of Finance Minister Nirmala Sitharaman, which is scheduled to be presented on February 1, 2024, just before the Lok Sabha elections, is being attentively observed by experts. The two main expectations of the sector are the creation of a distinct tax exemption category for term insurance and the possibility of a reduction in the Goods and Services Tax (GST) on specified insurance products.
Anticipations for the Budget 2024
Should We Prioritize Populist Initiatives or Fiscal Prudence?
The experts are divided on whether the budget will favor populist proposals above budgetary discipline. The financial environment for the next years may be shaped by this decision, which is significant for the insurance industry.
Budget 2024: Long-standing Wish- Insurance Taxation
Reassessing the 80 C section
The time frame before the release of the interim budget is considered a prime chance for the administration to attend to the ongoing calls for a reassessment of insurance taxes. Experts contend that because Section 80 C already covers a range of allowable expenses, term insurance is not eligible for a separate tax exemption.
A Unique Tax Exemption for Term Insurance Is Critically Needed in the Budget 2024
Experts stress how urgent it is to establish a distinct term insurance tax exemption category. Ageas Federal Life Insurance’s MD and CEO, Vighnesh Shahane, says, “We have been pleading with the government for the last five to six years to establish a distinct tax deduction limit for life insurance.” Santosh Agarwal, Chief Business Officer of Life Insurance at Policybazaar.com, claims that this action will incentivize taxpayers to choose higher-coverage term policies.
Reorganizing the Insurance Goods GST Rate
Budget 2024; there is a proposal to restructure the GST rate on insurance items in addition to creating a distinct tax exemption category. Reexamining the 18% GST rate, according to Santosh Agarwal, will help end users and encourage more people to engage in life insurance products.
Overview of Section 80 C
- Present Deduction Caps and Issues
Up to 1.5 lakh in deductions are permitted for a number of costs under the current Section 80 C, including PPF, ELSS, and life insurance. Despite its advantages, this all-encompassing strategy has presented difficulties. Vighnesh Shahane proposes establishing a distinct term insurance exemption category in order to close the gap.
Requesting the Creation of a Clear Deduction Cap
Vighnesh Shahane restates the business community’s demand for a specific deduction limit on life insurance. It is critical to solve this problem due to the complexity of the present system, which allows for numerous allowable charges under Section 80 C.
Effect on Higher Coverage and Term Plans
According to Santosh Agarwal, a distinct deduction limit for term insurance would encourage taxpayers to choose higher-coverage policies in addition to addressing the current issues.
Budget 2024-Plans for Tax-Free Pensions
- The Value of Starting Early to Invest for Retirement
The significance of early investment in retirement planning is emphasized in the essay. Tax benefits on annuity and pension products may motivate more people to put money aside for their retirement.
Annuity Products and NPS: Comparable Taxes
Santosh Agarwal suggests tying the National Pension Scheme (NPS) and annuity/pension products to the same tax rate. The purpose of this alignment is to provide equal treatment for various investment alternatives as well as long-term financial planning.
Exempting Annuity Income from Taxes
It has been suggested that annuity income from pension plans be excluded from taxes, given the present treatment of full annuity income. This action might guarantee tax law compliance and promote the adoption of pension schemes even further.
Equitable Conditions for Insurance Companies
Increasing Pension and Annuity Plan Tax Exemptions
Vighnesh Shahane emphasizes how important it is that insurance companies operate on fair playing fields. He proposes adding insurance company pension and annuity plans to the Rs. 50,000 tax exemption for the National Pension Scheme under Section 80CCD(1B).
Compliance with the Benefits of the National Pension Scheme
Like the industry experts, Satishwar B, MD & CEO of Aegon Life Insurance, emphasizes the need to extend tax exemptions to pension and annuity programs. Fair treatment would be guaranteed by this alignment, which would also promote a wider acceptance of these schemes.
Lowering of GST on Insurance Products
- Suggestions for the Reduction of GST
To improve accessibility, industry experts advise lowering the GST on a few insurance products.
Industry insiders recommended lowering in Budget 2024 the Goods and Services Tax (GST) levied on certain insurance product categories to make them more accessible to a wider range of individuals.
Santosh Agarwal claims that “a GST rate of 18%” has to be reevaluated to ensure that the end user benefits from insurance product prices, hence driving more investment in life insurance products.
Additionally, he said that the maximum deduction limits for senior citizen parents should be raised to Section 80CCD(1B) provides a tax exemption of Rs. 50,000 for the National Pension Scheme. Furthermore, he emphasized the need to include “Health Savings Accounts in the tax exemptions to give people more in-hand money to plan for rising healthcare expenses.”
Satishwar B suggested for Budget 2024; that certain critical policies, including the Pradhan Mantri Jeevan Jyoti Bima Yojana, smaller insurance policies up to Rs. 2 lahks, and annuity products for National Pension Scheme subscribers be given a “Zero rating.” Additionally, he supported lowering the GST on term life insurance to make insurance products more widely available to consumers.
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