Hit hard by the rising inflation and economic slowdown, everyone is looking towards the Budget 2023 with much hope and the insurance industry is no exception.
Currently there are several tax and other benefits that policyholders are eligible for in India. These benefits may vary depending on the type of insurance policy, premiums paid, and other factors.
Some of the benefits that policyholders may be eligible for include:
* Tax Deduction under Section 80C: Policyholders can claim a deduction for premiums paid for certain types of insurance policies, such as life insurance, up to a maximum of Rs 1.5 lakh per annum.
* Tax Deduction under Section 80D: Policyholders can claim a deduction for premiums paid for health insurance, up to a maximum of Rs 25,000 per annum for self, spouse, and children and Rs 50,000 per annum for senior citizens.
* Tax Deduction under Section 80DD: Policyholders can claim a deduction for premiums paid for disability insurance, up to a maximum of Rs 75,000 per annum for a disabled dependent and Rs 1.25 lakh per annum for a severely disabled dependent.
* Tax Deduction under Section 80DDB: Policyholders can claim a deduction for medical expenses incurred for certain specified diseases, up to a maximum of Rs 40,000 a year for individuals below the age of 60 and Rs 1 lakh a year for senior citizens.
* Tax Deduction under Section 80U: Policyholders can claim a deduction for premiums paid for insurance for a person with a disability, up to a maximum of Rs 75,000 per annum for a disabled individual and Rs 1.25 lakh per annum for a severely disabled individual.
Insurance Sector Wishlist for Budget 2023
However, to accelerate the growth in the industry and increase its penetration levels, the insurance industry is looking for further incentives and reforms in the upcoming Union Budget 2023.
“The Union Budget presents an opportunity to implement initiatives that will enhance the well-being of citizens and the nation as a whole. As a part of the insurance industry, we prioritize insuring as many people as possible and ensuring they have sufficient coverage. We believe the government’s support in this area will allow us to make even greater progress in achieving this objective,” says Sanjiv Bajaj, Jt. Chairman & MD, Bajaj Capital Ltd.
1. Tax incentives: The insurance industry is hoping for tax incentives to be introduced in the budget, such as reduced corporate tax rates and incentives for companies that invest in research and development.
2. Simplification of tax laws: The industry is hoping for a simplification of tax laws, including the Goods and Services Tax (GST) and the Income Tax Act, to make compliance easier for insurance companies. “Clinical establishments charge a 5% Goods and Services Tax (GST) on room rentals that exceed Rs 5,000 per day. Insurance companies are required to include this GST in the
settlement amount when processing health insurance claims. It is unclear if insurance companies are eligible for Input Tax Credit on this GST,” informs Bajaj.
3. Relaxation of regulations: The insurance industry is hoping for a relaxation of regulations, such as the requirement for insurance companies to maintain a certain solvency margin, to allow for greater flexibility and growth.
4. Increased access to insurance: The industry is hoping for measures to increase access to insurance, such as the expansion of microinsurance products and the use of technology to reach
underserved populations.
Probable changes for insurance policyholders
The insurance industry is anticipating several reforms in the upcoming Union Budget 2023, including changes to capital requirements, tax deductions, and solvency ratios. Insurers are expecting the minimum capital requirement to be reduced from its current level of Rs 100 crore, and the solvency ratio, which indicates the financial strength of the insurer, to be lowered from 1.5.
Additionally, “there are ongoing discussions about issuing a single license for all types of insurance products, which would allow insurance companies to sell a variety of products such as life insurance, travel insurance, and health insurance more easily. The Department of Financial Services and the Insurance Regulatory and Development Authority are also considering a one-time licensing rule rather than the current annual renewal requirement. Insurers have also requested for an increase in tax deductions on health insurance premiums, annuity plans, and other items to reduce tax liability,” says Bajaj.