As we enter the new year, here are some budget considerations likely for 2024, focusing on areas of insurance and taxation.
The budget for 2024 will be presented soon. Among other likely considerations in varied sectors, the insurance industry is also expecting a few recommendations and reforms regarding tax-free annuity plans, enhanced insurance coverage, improved tax benefits, and amendments in GST reforms to make insurance accessible for one and all.
2023 saw some pioneering transformation in the insurance sector. Technological advancements to make insurance buying a simple process and within the reach of everyone is one of the things. Increased awareness of insurance needs has made people realize the urgency of availing insurance – be it life, health, or any other insurance.
Let us look at the budget Wishlist for the insurance sector in this post for 2024!
Unrestricted Innovations in Insurance
The year 2023 has seen some pioneering innovations in the field of insurance. Advancements in technology in terms of the latest features like account aggregators and face analytics have enhanced the insurance sector services with a more customer-centric approach. This has additionally helped in expanding the reach of the insurance industry.
Further, to empower insurers’ expansion scope, IRDAI introduced the ‘use and file’ procedure, where insurers can launch any life or general insurance product first and file its details with IRDAI later. This has supported insurance companies in innovating and introducing new products to suit the preferences of every customer.
Bima Vahaks – The Way to Bridge The Gap in Insurance
For smooth penetration of insurance knowledge and to make it more accessible, IRDAI is launching Bima Vahaks, a women-driven distribution channel. It will likely bring insurance close to the masses through interactions and improved understanding at the ground level. Bima Vahak is a part of IRDAI’s insurance trinity, along with Bima Vistaar and Bima Sugam. Bima Vistaar is an affordable composite insurance product, whereas Bima Sugam is a one-stop shop for insurance platforms. These new products are likely to lead to new ways of insurance.
Wishlist for 2024 Budget – Recommendations and Strategies
To kick start the vision of providing ‘insurance for all by 2047’, IRDAI aims to bridge gaps between insurance products and their circulation as well as insurance pricing. Many strategic steps and recommendations are being taken towards that initiative, such as;
1. By Making Annuity Plans Tax-Free:
Annuity plans are best when investing in a pension scheme. If taxes are removed or made simpler for annuity products, it will encourage more people to invest in retirement plans and avail of a steady income. If tax exemption or low tax is allowed in these plans, it will encourage more people to spend on pension plans.
2. Increase Coverage and Enhance Benefits:
The second way is to augment coverage by improving Tax Benefits in India. When the key earning member of a family passes away, the policy pays the survivors to settle debts and live a decent life. However, it deducts some percent of the amount as tax in certain policies. If this deduction is eliminated, it will improve things for the policyholder and their family.
- Modifying sec 80C and 80D of the IT Act and separating tax breaks for critical diseases and term plans could reduce the gap between coverage and enhanced security.
- Another thing that will encourage more and more people to buy insurance is allowing policyholders to deduct the complete paid premium of life insurance plans from their taxable income, as mentioned in sec 56 of the IT Act. This should be done despite claims made under other sections like sec 80C and without reducing the paid amount. This way, policyholders can get complete tax benefits for the paid premiums to make insurance appealing.
3. Deduction of Premiums:
Reducing GST or the Goods and Services Tax on term plans with a ‘Zero rating’ will imply setting 0 % as the tax rate for certain important policies (covering up to INR 2 lakh and for annuity products), will also boost insurance penetration and enhance the financial security of citizens.
Collective Works to Shape the Insurance Industry
It is imperative to work collectively for the progress of the insurance industry. This will help shape the future of individuals better in terms of finances. With the ready accessibility of well-managed data via data enablement, more innovations are likely in the insurance sector in the coming time.
Further, with the support of bodies like IRDAI and different policy reforms, insurers are devoted to enhancing the reach of insurance and making it part and parcel of every family and individual to secure their lives and build a new future.