Salaried middle class taxpayers are expecting a ‘populist’ Budget from finance minister Nirmala Sitharaman in 2022. Amid the outbreak of Covid-19 Omicron third wave, the taxpayers want more relief from Union Budget 2022. From a higher limit in standard deduction to more benefits for premiums of life insurance policies, there is a host of new measures in middle class’ Budget wish list for 2022. Take a look
More Deduction on Life Insurance Premium Beyond 80C
Budget 2022 should pave a way to introduce a separate section under the Income Tax Act to claim deduction against insurance premiums, believed industry experts. At present, the taxpayers can claim benefits for insurance premiums under Section 80C. The upper limit of claiming relief for Section 80C has been capped at Rs 1.5 lakh. Apart from insurance premiums, taxpayer can claim benefits for several other investments under the above mentioned section. So it’s about time, that finance ministry offer a separate section to claim income tax benefits for premium paid towards life insurance policies in Budget 2022.
“Life insurance is a long-term solution, unlike other financial products which have a shorter investment horizon and are covered under the 80C provision.We expect the budget to consider creating a separate section for tax deduction on premium paid towards life insurance. This would enable a more logical segregation of customer’s funds into long-term and short-term kitties,” said Subhrajit Mukhopadhyay, executive director, Edelweiss Tokio Life Insurance.
Firstly, this would encourage more salaried individuals to invest in life insurance policies. In a country like India, where the penetration of life insurance policies are still considerably low, few additional measures like tax incentives are required to boost the consumption, experts opined. Insurance industry demanded special incentives for women insurers and first time life insurers to bring more people under life insurance covers.
Reduction of GST on Life Insurance Premiums:
When it comes to buying life insurance, affordability is a major factor, believed industry experts. Currently, an insurer has to pay a hefty amount of 18 per cent Goods and Services Tax (GST) on life insurance premiums. This additional tax on term covers increases the premium amount which acts as a hindrance for many prospective policy buyers, said an expert. Removing GST on life insurance premiums can make covers more affordable for aam aadmi.
“Reduction in GST on insurance premiums, and stamp duty exemption for term life insurance policies would help give a fillip to insurance penetration in the country. The government should also look to rationalise the GST on term products to help make protection-oriented products more affordable,” said Manoj Jain, managing director, Shriram Life Insurance. “Covid-19 has increased the awareness for insurance products. Individuals now want to protect themselves and their families from financial uncertainties, diseases and death. There has been a visible uptake in both life as well as health insurance products. This has also brought about an increase in the amount of premium paid by policyholders. Hence, enhanced deduction for life and health insurance premiums would provide the much-needed fillip to improve insurance penetration,” said Niraj Shah, chief financial officer, HDFC Life Insurance.
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