Life Insurers Call for GST Rationalization and Annuity Tax Break in Budget 2024
The life insurance sector's expectations for the forthcoming Union Budget 2024-25 encompass a call for the rationalization of Goods and Services Tax (GST) and tax concessions on annuities. According to Sumit Rai, the MD and CEO of Edelweiss Tokio Life Insurance, a reduction in the GST rate, currently set at 18 percent for life insurance term policies, could improve affordability for the general public, especially those seeking protection-focused products.
Sumit Rai, MD and CEO of Edelweiss Tokio Life Insurance, emphasizes the social importance of alleviating the Goods and Services Tax (GST) burden on life insurance, particularly term policies, over the last 2-3 years. He suggests that a reduction in the current 18 percent GST rate could enhance affordability, addressing the needs of a broad population interested in protection-oriented products. Rai also advocates for a significant change in the annuity market, proposing a tax break on annuities as a potential game-changer. Currently, annuities are taxed both at entry and exit, and Rai suggests eliminating double taxation. Furthermore, he recommends extending the tax benefit of Rs 50,000, applicable to the National Pension System (NPS) under Section 80CCD (1b), to annuities.
Highlighting the crucial role annuities play in offering consistent income throughout an individual's life, life insurance providers are pushing for a reevaluation of the Rs 5 lakh cap, proposing an increase to Rs 10 lakh. Pankaj Gupta, MD and CEO of Pramerica Life Insurance, stresses the industry's request for a separate tax deduction limit for life insurance, specifically focusing on term insurance within the existing provisions of Section 80C. This, he believes, would incentivize individuals to invest in life insurance policies, promoting a sense of long-term security.
Gupta also underscores the Insurance Regulatory and Development Authority of India's (IRDAI) commitment to achieving 'insurance for all' by 2047, emphasizing improvements in the availability, accessibility, and affordability of insurance services. Anticipating ongoing changes in the insurance sector, including technological advancements, enhanced customer experiences, and a focus on environmental and social responsibility, Gupta expects the upcoming Budget to continue themes of infra capex and self-dependency. According to IRDAI data, life insurers witnessed a 7.1 percent decline in the first-year premium until December 2023, amounting to Rs 2,50,274 crore, attributed mainly to a reduction in group premiums compared to the corresponding period last year, which recorded Rs 2,69,190 crore.