Middle-class, salaried taxpayers await a ‘populist’ budget from Finance Minister Nirmala Sitharaman in 2022. Amid the outbreak of the third wave of Covid-19 Omicron, taxpayers want more budget relief from the Union 2022. From a higher standard deduction limit to more premium benefits for life insurance policies, there are a host of new measures on the middle class budget’s 2022 wish list. Take a look
No more deduction on life insurance premium over 80C
The 2022 budget should pave the way for the introduction of a separate section in the Income Tax Act to claim a deduction on insurance premiums, industry experts say. Currently, taxpayers can claim benefits for insurance premiums under Section 80C. The upper repair claim limit for section 80C has been capped at Rs 1.5 lakh. Apart from insurance premiums, the taxpayer can claim benefits for several other investments in the above mentioned section. So it’s time for the Department of Finance to come up with a separate section to claim tax benefits for premiums paid for life insurance policies in the 2022 budget.
“Life insurance is a long-term solution, unlike other financial products which have a shorter investment horizon and are covered by the 80C provision. We expect the budget to consider creating a section tax deduction on premiums paid for life insurance. This would allow for a more logical separation of client funds into long-term and short-term pools,” said Subhrajit Mukhopadhyay, Executive Director, Edelweiss Tokio Life Insurance.
First, it would encourage more employees to invest in life insurance policies. In a country like India, where the penetration of life insurance policies is still considerably low, few additional measures such as tax incentives are needed to boost consumption, experts said. The insurance industry demanded special incentives for female insurers and early life insurers to bring more people under life insurance coverage.
GST reduction on life insurance premiums:
When it comes to buying life insurance, affordability is a major factor, say industry experts. Currently, an insurer must pay a hefty 18% Goods and Services Tax (GST) on life insurance premiums. This additional tax on term covers increases the premium amount, which is a barrier for many potential policy buyers, an expert said. Removing GST from life insurance premiums may make coverages more affordable for aam aadmi.
“Reducing GST on insurance premiums and waiving stamp duty for term life insurance policies would help boost insurance penetration in the country. The government should also seek to streamline the GST on term products to help make protection-focused products more affordable,” said Manoj Jain, Managing Director, Shriram Life Insurance. “Covid-19 has increased awareness of insurance products. protect themselves and their families from financial uncertainty, illness and death. There has been a visible increase in life and health insurance products. This has also led to an increase in the amount of premiums paid by policyholders. life and health insurance premiums would provide the much needed boost to improve insurance penetration,” said Niraj Shah, Chief Financial Officer, HDFC Life Insurance.
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