Budget 2020 Expectations for Life Insurance: Life insurance industry plays a significant role in nation-building through investment in government securities.
Budget 2020 Expectations for Life Insurance: With the top most priority of this budget on reviving growth of the slowing Indian economy, the need of the hour is to stimulate investment in capacity creation and infrastructure development, which necessitates mobilisation of long-term household savings. Such investments would create jobs and would make available higher disposable income in the hands of more people, which in turn would create a demand pull, leading to higher productions, higher job creations and even higher demand.
Life insurance industry plays a significant role in nation-building through investment in government securities as households prefer life insurance for building long-term savings for various life goals and retirement needs.
With the holding Rs 12 lakh crore or 21 per cent of outstanding central government securities and Rs 3.9 lakh crore of long-term infrastructure investments, the life insurance industry has the capacity to supplement the government’s efforts towards the growth objectives.
To make life insurance products – especially the annuity products used by people as pension plans – attractive, the life insurance industry wants the government to several measures through tax incentives like tax-free annuity and a separate section for tax deductions on life insurance premium in the Income Tax Act.
“Some constructive steps which can create the right environment include creating a separate limit for tax deduction in addition to Rs 1,50,000 available under section 80C, and making annuities from life insurers tax-free,” said G Murlidhar, Managing Director, Kotak Life Insurance.
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To make annuity products of life insurance companies more appealing, it is also expected to make it at par with National Pension System (NPS) so that more people invest in such products.
“Ensuring parity in tax treatment of pension products across all investment platforms by providing deduction limit for life insurance pension product similar to NPS under section 80CCD and waiving GST on annuity purchased out of maturity of pension policies in line with NPS, will further aid in mobilising long-term savings,” said Murlidhar.