Union Budget 2021 India: Currently, there is a disparity between the pension schemes offered by the Life Insurance companies and the NPS, which is offered by the Government.
Budget 2021: India’s economy will more than offset the deep contraction suffered in the current fiscal in FY22, with the GDP, in absolute term, crossing the level witnessed in FY20, the secretary said.
Indian Union Budget 2021-22: The Institute of Chartered Accountants of India has proposed that the tax implications on pension policies sold by insurance companies and the New Pension Scheme (NPS) of the government should not be different.
Currently, there is a disparity between the pension schemes offered by the Life Insurance companies and the NPS, which is offered by the Government. “Pension policies & NPS both are similar products and therefore tax implications on these products should not make them different products,” ICAI said in its Pre-Budget Memorandum.
To remove the disparity, the ICAI has suggested the government to provide for an enhanced deduction limit for the premium paid on pension policy under Section 80CCC read with Section 80CCE.
The ICAI suggested the following ways in which the enhanced limit may be provided:
Additional deduction for Rs 50,000 for premium paid for pension policy issued by the Life insurance companies similar to that provided in section 80CCD(1B) of the Income Tax Act 1961.
Additional deduction under section 80CCC to the extent of 14% by Central Government/10% of salary similar to section 80CCD(2) of the Income Tax Act 1961.
Above limits may be in addition to the existing limit.
Similar to section 80CCD(5), the uncommuted portion (generally 2/3rd) under a pension policy, which is mandatorily used to buy an annuity plan, should be treated as not having been received and hence, not taxable.
60% Maturity proceeds exemption as provided in section 10(12A) of the Act.
Under NPS, an additional deduction for investment up to Rs.50,000 has been provided under section 80CCD(1B) of the Income Tax Act, 1961 to both salaried and self-employed individuals. This additional deduction is over and above the ceiling of Rs.1,50,000.
If the above measures suggested by ICAI are implemented, tax implications for contribution to NPS and other pension policies of insurance companies will become similar.
Deduction for home, personal accident cover
The ICAI has also suggested the government to provide a separate deduction to the policyholders for payments relating to travel insurance, home insurance or personal accident insurance.
At present, deduction under Section 80C is available for Life Insurance Policy and deduction under Section 80D is available for health insurance premiums.
“Deduction for insurance premium relating to travel, home etc. will boost the policyholders to secure their assets like car, home, etc. and also to avail personal accident cover,” the ICAI said in its Pre-Budget Memorandum.