At present, life insurance premium have tax exemption under Section 80C
Life insurance companies want Finance Minister Nirmala Sitharaman to increase the tax exemption limits for insurance policies in the Union Budget 2019.
At present, life insurance premiums paid are exempt from taxation under Section 80C of the Income Tax Act. This is part of the Rs 1.5 lakh exemption limit. However, insurers want the government to introduce separate limits for life insurance.
V Viswanand, Deputy Managing Director, Max Life Insurance said that a separate tax exemption limit should be carved out for life insurance premium.
"Additional tax sops in the form of an increase in the exemption limit for the premiums paid will be beneficial. It will help boost insurance penetration," he added.
Insurance companies had also sought term policies to be made mandatory for all Indian citizens. However, this proposal was not accepted by the Finance Ministry. At present, only motor third party cover is mandatory by law.
Harshad Patil, EVP and CIO Tata AIA Life Insurance said that they would be delighted if the government announced some measures to boost financial savings by carving out a separate section for the taxpayers exclusively for life insurance premiums, under 80C.
Overall, he said that the government will deliver a fine balance of growth-oriented measures while maintaining fiscal prudence in the Union Budget.
Goods and services tax (GST) has also been a pain-point for insurance companies. Insurers want the 18 percent GST to either be made nil or brought down to 12 percent. The insurance regulator had also sought a trimming of GST on essential insurance products.
While the GST Council takes a decision on these rates, it is likely that Nirmala Sitharaman will announce the GST vision of the government during her Budget speech.Among other areas, non-life insurers are also seeking tax sops for segments like home insurance. This is to ensure that premiums paid for such policies are exempt from tax. Further, life insurers are seeking a tax parity between retirement plans of insurers and Pension Fund Regulatory and Development Authority's (PFRDA) National Pension Scheme.