Budget 2025: Top Insurance Sector Expectations

As the Narendra Modi-led government is set to announce 8th Union Budget, the insurance industry is positive on introduction of a few key reforms that could improve financial inclusion, address concerns related to affordability, and align Indian insurance practices with global standards.

Below-mentioned are some of the key insurance sector reforms that can turnaround the insurance industry in a positive way:

Tax Exemption for Term Insurance: Term Insurance is a crucial part of financial planning, providing taxpayers with life coverage at an affordable cost. However, due to absence of a dedicated tax exemption in term insurance premiums, individuals are hesitant to invest in adequate term insurance plans.

Reduced GST rates on Insurance products: Insurance products are currently leviable to 18% GST, due to which insurance premiums are significantly higher, specially for middle-class, causing a hole in their pockets. High premiums, added with higher GST rates, makes insurance completely unaffordable for the lower-income group. Therefore, reducing GST rates would make insurance more accessible, providing relief to policyholders and encouraging life coverage, specially among the lower-income groups.

Enhanced Tax Deductions for Health Insurance: As it is evident that insurance premiums are soaring with time, hence, it has become crucial to address the challenge faced by individuals. Therefore, increasing the deduction limit under section 80D to ₹50,000 for individuals and ₹1 Lakh for senior citizens could provide a major relief.

Exempting Annuity Income from Tax: Annuity products are an important part of retirement planning, however, current tax treatment for annuity income and principal does not encourage the individuals to use them. Therefore, exemption of annuity income from taxation would encourage more individuals to invest in retirement products, allowing them more financial stability.

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