By Rajesh Sud
Budget 2018: It is that time of the year when the Union Budget is in focus for most Indians. A Budget that promotes GDP growth, generates employment, reduces inflation and leaves more money in the hands of people is what India would expect from the finance minister. To continue with the current growth trend, life insurance will look forward to 7% + GDP growth for the next few years. Let me add to the list of requests to the finance minister to promote the agenda of building a financially secure society.
Separate income tax exemption for life insurance
Given that social security provided by the government is minimal, it is important to nudge people to create a secure future for their loved ones. There is a need to motivate people to invest in long-term financial instruments such as life insurance by creating income tax exemption limit, independent of more liquid/ short-term instruments. A separate limit of `50,000 per annum for life insurance will provide the necessary impetus to long-term financial planning.
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Level playing field for all pension schemes
This has been a priority item on the life insurance industry’s wish list for a long time. There is a need to bring life insurance industry on a level playing field with NPS, to create a meaningful retirement corpus for a large majority of Indians. Life insurance commands one of the deepest retail reach which should be leveraged to nudge Indian households towards retirement planning by providing tax benefits. Life insurance pension plan should also be included in the separate limit of `50,000 currently offered under Section 80CCD of NPS and 40% of maturity proceeds should be tax exempt on lumpsum withdrawal. Besides this, exemption on annuities arising from such pension plans should be allowed, as is the case with returns on tax-free bonds, provident fund withdrawal, etc.
GST exemption on pure protection instruments
While the introduction of GST last year was in line with government’s stand on bringing more people into the formal economy, pure protection life insurance products should be exempted from it.
Support through government-led programmes
The government has introduced plans such as Pradhan Mantri Jeevan Jyoti Bima Yojna, Pradhan Mantri Suraksha BimaYojna, Atal Pension Yojna in the last few years. However, there is a need to revisit the current protection cover of Rs 2 lakh offered under these schemes which may be enough only for a small number of Indians, who are getting initiated into the formal financial sector.
This Budget will be a special one as it is the last one before the General Elections. While the expectations of the public are around income tax changes, the life insurance industry will look forward to inclusion of the above-mentioned suggestions for superior focus on building a financially secure society.
The writer is executive vice chairman and MD, Max Life Insurance