Union Budget 2020 India: Beset with low penetration and lack of awareness, the Indian insurance industry also has a big list of expectations from Finance Minister Nirmala Sitharaman.
By Yash Shukla
Budget 2020-21: Union Budget 2020 is round the corner and expectations are running thick and fast from various industries. Beset with low penetration and lack of awareness, the Indian insurance industry also has a big list of expectations from Finance Minister Nirmala Sitharaman. At a time when the economy is crying for investment in infrastructure, the insurance sector may give a helping hand to long term infrastructure investments. “The industry has invested Rs. 3.9 trillion in long term infrastructure projects. It can supplement the government’s efforts towards growth objectives,” said G Murlidhar, Managing Director Kotak Life Insurance. The industry also has a share of 21 per cent in government’s outstanding securities, he added.
However, the unexplored potential of the sector gets reflected in an extremely low level of penetration.”Overall insurance penetration hovers at 3.7 per cent of the GDP according to the figures provided by the Insurance Regulatory and Development Authority of India (IRDAI),” said Vineet Arora, MD and CEO, Aegon Life Insurance. A whopping 80 per cent of the losses in the economy are uninsured and second-largest insurance gap in the world at $27 billion only after China’s $76 billion, he added.
The demands from the industry experts appear to be unanimous, ranging from low GST on insurance plans, parity with government-owned National Pension Scheme NPS and high tax reductions under section 80D. “In order to reduce the gap between the taxation of pension policies issued by life insurance companies vis-à-vis NPS, the additional tax deduction of Rs 50,000 for premium paid (as available for NPS) should be extended to pension policies issued by Life Insurance Companies,” S N Bhattacharya, Secretary, Life Insurance Council said recently.
Watch Video: What is Union Budget of India?
Companies also expect a separate rebate on income tax for insurance sector over and above the present limit of Rs 1.5 lac under section 80C. Experts complain that Rs 1.5 lac limit is too less to accommodate varied needs ranging from Home loan, Public Provident Fund to life insurance. “In order to enable customers to invest, the government should either consider a separate deduction section or enhance the limit under Section 80C to Rs 3,00,000, since the current limit of INR 1,50,000 is too low to cater to all the contributions it covers,” said Tarun Chugh, MD & CEO, Bajaj Allianz Life has said.
With skyrocketing medical expenditure the sector has also asked for an increase in the tax rebate for medical insurance under section 80D. “Tax Rebate cap for medical insurance under Sec. 80D be increased further from Rs 25,000 to Rs 50,000 for self and from Rs 50,000 to Rs 75,000 for dependent parents. This will be a huge relief for those who are struggling to meet rising healthcare costs,” said Pushan Mahapatra, MD and CEO, SBI General Insurance.
Presentations have also been made to lower the stamp duty on the insurance plans and some incentives for women buyers. It remains to be seen how many demands could be accommodated as the government already finds itself in a tight spot over its fiscal deficit target. Giving additional tax benefits to consumers may increase the size of the hole further.