Budget 2020-21: To ensure buyers don’t feel the pinch of buying vehicles complying with BS-6 norms, it would help if tax sops are provided on automobiles purchase.
Union Budget 2020 India: This year’s Union Budget holds much significance, as the country experiences multiple headwinds at the domestic front and uncertainty at the global level. Then is the need to ensure growth and employment opportunities for the burgeoning young and middle-class population.
The year 2019 recorded economic losses of more than Rs 2,700 billion due to floods across states in the country, with the insured losses being only around 8% of the total losses. As a nation, we continue to witness low insurance penetration with non-life insurance at 0.9% of GDP. Given this scenario, the need of the hour is for policymakers to balance growth measures with appropriate risk mitigation initiatives for a sustainable long-term development. When it comes to the non-life insurance sector, key segments, i.e., health, motor and home insurance need to be focused on.
Increase tax deduction on health insurance premium
India is grossly under-penetrated when it comes to health insurance. As per the National Family Health Survey, less than one-third (29%) of the households have at least one member covered under health insurance. Medical inflation in India has been rising at an alarming rate, and average retail healthcare inflation in the country stood at 7.14% in 2018-19. Given the scenario, it’s important for all to be protected with adequate health insurance.
Increasing tax deduction on health insurance premium can bring more people under its ambit. Currently, health insurance premiums up to Rs 25,000, paid for self, spouse and children, qualify for tax deduction under Section 80D. At the same time, one can seek an additional deduction up to Rs 50,000 for parents above 60 years age group. An increase in exemption limits will incentivise a larger number of people to avail health insurance benefits and boost health insurance penetration.
One needs to also address the problem of under-insurance. Currently, the average sum insured for health insurance policies stands at Rs 5 lakh. As lifestyle diseases emerge and medical inflation rises, it is important that we introduce measures to push customers to increase their health insurance cover to at least Rs 10 lakh. Providing exemption on the premium paid towards health cover will encourage customers to avail of higher sum insured policies.
Support auto sector transformation
With BS-6, India will align closer to global norms, though the cost of vehicle ownership will rise. To ensure buyers don’t feel the pinch of buying vehicles complying with BS-6 norms, it would help if tax sops are provided on automobiles purchase. It is important to provide tax break on premiums paid for motor insurance availed for vehicles conforming to BS-6 emission norms.
Introduce tax breaks on home insurance
The recent natural calamities, including the devastating Kerala floods, destroyed thousands of homes. Compared to developed nations in the world, home insurance penetration in India is abysmally low at less than 1%. Tax breaks in this segment will not only help in increasing its adoption but also ensure people are not left in the lurch in the face of an eventuality damaging their homes and belongings.
The writer is executive director, Retail, ICICI Lombard General Insurance Company
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