Budget 2024: Strategies to Increase Insurance Policy Sales

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Budget 2024 is approaching, bringing with it potential changes that could reshape the Indian insurance sector. With India’s insurance penetration still lagging behind global standards, tax benefits play a crucial role in driving insurance purchases. As the industry looks ahead, it advocates for adjustments aimed at achieving comprehensive insurance coverage for India by 2047.

In the wake of the pandemic, where financial security has gained paramount importance, the sector pins its hopes on tax incentives to bolster the nation’s protection index.

Let’s explore the key proposals for change, drawing from initial expectations and insights from discussions on restructuring tax benefits:

Reassessing tax deductions under Section 80C:

  1. There’s a call for a thorough review of tax structures under Section 80C. The current deduction limit of Rs 1,50,000 needs reevaluation and possible expansion.
  2. Advocates propose creating a separate exemption category for term insurance to address the challenge posed by the existing limit. This aims to encourage taxpayers to opt for broader coverage term plans, enhancing financial security.
  3. Additionally, introducing a stand-alone deduction of Rs 50,000 for term insurance premiums could further boost insurance penetration.

Ensuring Fair Tax Treatment for Pension Products:

Retirement planning is crucial for long-term financial security. The industry urges for equal tax treatment for pension products, similar to the National Pension Scheme (NPS).
Currently, annuity income is taxed in its entirety, including principal and interest. There’s a proposal to grant tax-free status to annuity income, making pension products more attractive for retirement planning.
Promoting health insurance post-pandemic:

Suggestions include increasing the deduction limit for health insurance premiums, particularly for self, spouse, and dependent children, and for senior citizen parents.
Introducing tax-exempt Health Savings Accounts can encourage individuals to save for healthcare emergencies, fostering a proactive approach towards health and well-being.

Making group health insurance appealing to MSMEs:

  • Group health insurance is crucial for making insurance more accessible, especially for Micro, Small, and Medium Enterprises (MSMEs).
  • Further incentivization is needed, particularly for MSMEs, to encourage them to adopt employee health insurance as part of their workforce strategy.
  • Budget 2024 presents an opportunity to enact reforms that can propel the Indian insurance sector towards greater inclusivity and resilience. By aligning tax policies with the evolving needs of individuals and businesses, the government can foster a more robust insurance ecosystem.

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