Page 36 - Insurance Times February 2022

of 101.62 crore number of lives under Personal Accident citizens of the country opt for life and health insurance
Insurance. It includes 49.04 crore number of lives covered as per their personal requirements. We expect
under Government Sponsored Schemes namely Pradhan Government should consider as: (i) An aggregate
Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jan deduction up to Rs 5 lakh should be provided for life and
Dhan Yojana (PMJDY) and IRCTC Travel Insurance for e-ticket health insurance premium paid. To achieve this and to
passengers. simplify tax laws, a single section may be introduced for
insurance premium deduction. (ii) Alternatively, rebate
The pandemic induced disruption did result in a behavioural of 30% (restricted to Rs 150,000) of the insurance
change of households with the life insurance industry premium paid should be available from tax payable on
registering a smart growth, with new business premium the total income. The deduction/ rebate for life and
indicates that single premium income expanded by 26.1% in health insurance premium should be available
FY21, compared to 10.7% in FY20. Despite the strong growth, irrespective of the taxation regime opted by individuals/
the Indian insurance industry needs further support from HUF since it will help to reduce social security burden
Government to have an insured economy going forward. of the Government.
Y Zero or 5% GST on Pure Protection Insurance Polices:
II. Expectation from the Union Budget At present all insurance policies are taxed at GST of 18%.

2022-23 A significant reduction in premium will go a long way in
building a secure nation where every household will have
Given the progressive mind-set of the Government, it is quite the ability to overcome financial stress caused by
natural to keep high expectations in the forth coming Union
unforeseen events of life. So, the premium paid on
Budget, which is supposed to layout a clear roadmap to plug
insurance should not be taxed, as it is an instrument that
the protection gap, by increasing the insurance density in
provides financial protection against risk. Further, in India
the country. In the following, we have briefly highlighted the the insurance penetration is low; the introduction of tax
expectations from the budget for the Insurance sector.
in the realm of insurance may not represent the best step
forward. After COVID 19 pandemic effect on the
a) Ensure Appropriate Taxation Policies economy, it seems this is right time to reduce the GST

In India, insurance has always remained a push product, as rate to 5% or "Nil" rate on Life/health/Term insurance
a very few number of people may demand it from their own. to cover maximum population of India.
This may be due to lower awareness, literacy and other
Y Unit Linked Insurance Plan (ULIP): In the Finance Act,
religious factors. Most of the people, especially in rural
2021, various amendments introduced under the Act
areas, used life insurance policies as a savings instrument
and Finance (No. 2) Act, 2004 with respect to taxation
but the trend is changing in urban areas. In urban areas,
of unit linked insurance policies (ULIP) issued on or after
there has been a rising demand for term insurance policies
1 February 2021 and where the annual premium for any
in the last couple of years and Government should push
year during the term of the policy exceeds Rs 2.5 lakh,
these types of products to increase insurance penetration
in the country.
Some recommendations relating to insurance
sector regarding taxation is as follows:

Y Enhanced deduction for insurance premium in view
of continuing distress caused on account of Covid-
19: Under 80C of the Income Tax Act, the maximum
tax deduction is Rs 1.5 lakh, which includes a number
of items like interest rate paid on housing loans,
investments in tax savings bonds, PPF etc. Since, Covid-
19 pandemic has amplified the need for adequate life
and health insurance. To reduce social security burden
on the Government exchequer, it is essential that

36 The Insurance Times, February 2022