Insurers urge higher 80 C investment limit

Mumbai: Insurance companies are seeking a separate deduction limit of Rs 1 lakh for insurance premium payment under Section 80 C of the Income Tax Act in the upcoming Union Budget to bring in more people under the ambit of insurance.

The insurers also want reduction in the goods and services tax (GST) rate of 18 per cent currently applied on health insurance products to 5 per cent to make such products more affordable to common people. Finance Minister Nirmala Sitharaman will present the Union Budget for 2022-23 on February 1. "The industry has long pending expectations from the policy makers for incentivizing people to get life insurance by giving a separate deduction limit of minimum Rs 1 lakh for insurance premium payment under Section 80C," Tarun Rustagi Chief Financial Officer Canara HSBC OBC Life Insurance said. Life insurance is a long-term solution, unlike other financial products which have a shorter investment horizon and are covered under the 80C provision. Currently, all financial purchases are clubbed under the same IT deduction section (80C) capped at Rs 1,50,000. "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," Edelweiss Tokio Life Insurance Executive Director Subhrajit Mukhopadhyay said.

Ageas Federal Life Insurance Managing Director and CEO Vighnesh Shahane said the Section 80 C is currently cluttered with several investment options such as Public Provident Fund (PPF), Equity-Linked Savings Scheme (ELSS) and National Savings Certificate (NSC) amongst others. "At least, a separate section for term policies would be helpful given the current scenario and the huge protection gap in the country," Shahane said. Future Generali India Life Insurance Senior VP and Head Products and Development Chinmay Bade said that life insurance is a proxy to social security in case of death of a person as well as survival and, therefore, the exemption limit of 1.5 lakh under Section 80C needs a revision. As per IRDAI's Annual Report-2020-21, insurance penetration in the country is at 4.2 per cent of the GDP vis-à-vis a global average of 7.4 per cent. As of March, 2021, the non-life insurance penetration stood at barely 1 per cent. Liberty General Insurance CEO and Whole-Time Director Roopam Asthana said due to the uncertainty spurred by the Covid-19 pandemic, health insurance has become an everyday need in order to protect oneself from uncertainties and is more relevant than ever.