India Budget 2024 - Insurance Industry Expectations

Its that time of the year when every business in the country gets excited by the Annual Budget for the upcoming financial year i.e. April 2024 to March 2025. However, as this is an election year, where the electorate gets to decide as to who will rule them for the next five years, the Budget will be limited in scope, interim in nature with no major policy announcements, and the full and final budget will be presented later in the course of the year by the Finance Minister from the newly (to be) formed cabinet.

Even in the interim scheme of things, many of the insurance companies as well as actors representing various interests in the insurance industry including trade bodies have come out with wish lists as reported in the Newspapers, and have listed below whatever one could google and find:

(a) ?Taxscan - ICRA Analytics - suggests that (i) there is a possibility of introducing a distinct tax deduction for life insurance premiums in the forthcoming Interim Budget (ii) there’s a possibility that the government might review the 18% Goods and Services Tax (GST) imposed on health insurance policies. (Read more at URL: https://www.taxscan.in/budget-2024-could-a-separate-tax-deduction-for-life-insurance-premiums-be-in-the-cards-know-the-benefits/367576/)

(b) ?Moneycontrol – Life Insurance Industry – (i) Relax the Rs 5-lakh premium cap on tax-free maturity proceeds (ii) Tax-free status to annuity income (iii) Separate deduction for term policies, also under new regime (iv) Annuity or pension products should have parity with the National Pension Scheme (NPS). (Read more at URL: https://www.moneycontrol.com/news/business/budget/union-budget-2024-life-insurers-want-tax-free-annuity-income-term-insurance-benefit-under-new-regime-12110491.html

(c) Moneycontrol – General / Health Insurance Industry – (i) Hike in deductions for health insurance premium payments and medical expenses. (Read more at URL: https://www.moneycontrol.com/news/business/budget/budget-2024-and-the-taxpayer-higher-basic-exemption-limits-more-medical-deductions-needed-12040781.html?pitchclick=PersonalFinance

(d) Business Today (bt MoneyToday) – (i) higher government investment in the insurance sector (ii) Changes in section 80C of the Income Tax Act, allowing a higher cap for premium payments, incentivising more people to invest in insurance products (iii) reduction in the GST rate on insurance premiums (iv) elimination of taxation on annuity returns?(v) easing minimum capital requirements for new insurers (vi) introducing of composite license (vii) focus on microinsurance for low-income groups (viii) Support for InsurTech startups (ix) focus on cybersecurity (x) legal framework that supports InsurTech businesses (xi) zero rating of pension & annuity plans, i.e., GST rate of 0% for them (xii) introducing a separate tax deduction limit for term life insurance. (Read more at URL: https://www.businesstoday.in/personal-finance/insurance/story/budget-2024-25-here-is-what-experts-expect-for-the-insurance-sector-414499-2024-01-23

(e) Mint – (i) Introducing a separate tax deduction limit for life insurance (ii) changing tax sections 80C and 80D to provide separate tax breaks for life and health insurance payments, as well as fixed-term insurance plans (iii) tax exemption like NPS under Section 80CCD(1B) to pension and annuity plans (iv) zero rating of pension and annuity plans, i.e., setting a GST rate of 0%. (Read more at URL: https://www.livemint.com/money/personal-finance/budget-2024-expectations-extending-tax-exemption-for-pension-and-annuity-plans-11705910838747.html

(f) The Hindu – businessline – (i) GST rate rationalisation from the current rate of 18% on life insurance term policies (ii) tax-break on annuity. (Read more at URL: https://www.thehindubusinessline.com/economy/budget-2024-25-rationalisation-of-gst-tax-break-on-annuity-top-wish-list-of-life-insurers/article67768915.ece

(g) ?CNBCTV18 – (i) reduction of GST on retail health insurance products from the existing 18% (ii) simplifying the tax implications of insurance. (Read more at URL: https://www.cnbctv18.com/economy/budget-2024-healthcare-pharma-sectors-expect-tax-incentives-pli-incentives-18863901.htm)

Most of the other websites I have perused have more or less the same demands from the finance minister. I am sure that the readers would have heard of most of the points enumerated above, but one point that is worth debating on is the requirement from some regarding support for InsurTech startups. As per the governments desire of “Insurance for All”, the said goal can be realised only with huge investments in tech as well as artificial intelligence, and it will be great if policy makers can find a way to support the implementation of InsurTech, so that all the hindrances in last mile delivery which prevents penetration, whether in underwriting or in claims, can be smoothened out, and we reach the national goal well in time.

Another point I noted, or lack of point(s) is from the General Insurance Industry (Non-Life). Except for players in the health insurance business, the General Insurance Industry does not seem to have any wish list for the Government (or it might not have been communicated to the media, whether digital or print). It’s been quite a surprise, that the GI industry has not yet conveyed its wishes to the powers that be; there is still time to go, and hope that the leaders of the industry put their heads together and communicate their wishlist to the government on priority (and if the same has already been communicated, please do share the link)!

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