Life and health insurers expect the government to raise the income tax exemption limit on life and health premium payments and align the tax treatment of insurance annuities with other pension products in the Budget. These measures would help boost insurance penetration, channel long-term savings into annuity and retirement products, and encourage wider adoption of preventive care, industry players said.
Tarun Chugh, MD & CEO, Bajaj Life Insurance, said recent policy measures, such as the exemption of insurance premiums from GST, have laid a strong foundation for sectoral growth, and the Budget can build on this momentum. He expects the Budget to align the tax treatment of insurance annuities with other pesion instruments, such as taxing only the returns on annuity payouts and extending comparable deductions. “This would allow individuals to choose retirement products based on suitability, rather than tax differences.”
Simplify Tax Framework
Chugh said bringing parity in taxation between traditional and unit-linked life insurance policies can simplify the tax framework and encourage disciplined, long-term wealth creation alongside protection.
Jude Gomes, MD & CEO of Ageas Federal Life Insurance, said policymakers must focus on encouraging long-term savings and retirement preparedness. “We recommend revising the long-standing Section 80C limit or creating a separate deduction category for life insurance premiums and annuity contributions.”
Alok Rungta, MD and CEO, Generali Central Life Insurance, also said the limits on tax concessions for life insurance and retirement products must be revisited, as the current thresholds do not reflect rising incomes or evolving life-stage needs. Expanding deductions or making incentives easier to claim, he said, would significantly boost demand for higher-value policies, especially given the high protection gap in India.
Current Section 80C
Under the Income Tax old regime, premiums paid towards term life insurance policies are eligible for deduction under Section 80C of the Income Tax Act, 1961, up to ₹1.5 lakh per annum. However, this ceiling is shared with several other savings instruments, including the National Pension Scheme, Atal Pension Yojana, equity linked savings scheme, insurance-issued pension plans, unit linked insurance plans, Public Provident Fund and National Savings Certificates.
“We also call for simplifying the taxation of maturity proceeds from life insurance policies and revisiting the current ₹2.5 lakh annual premium threshold for ULIPs, in line with rising income levels and inflation,” Gomes said.
From a health insurance perspective, Srikanth Kandikonda, CFO, ManipalCigna Health Insurance, said the Budget should focus on policy measures that encourage preventive healthcare, which can significantly lower long-term treatment costs as medical inflation is projected to grow at 11.5%–14%. “Introducing separate and enhanced tax benefits for out patient department services and preventive health screenings, beyond the current limits under Section 80D, would encourage wider adoption of preventive care.”