The annual Union Budget 2003 is just a few weeks away. And if most industries have chalked out their list of demands for the finance minister, can insurance be left behind?
The insurance sector was thrown open to private participation only last year. Although insurance has existed for several decades now, it’s yet considered a sunrise industry. Its only now as we see newer insurers with innovative products that we understand how much insurance has to offer to us. If allowed to blossom, this sector holds boundless potential for growth. To that extent, the insurance sector is really looking at the budget for sops to help it realise its potential
We have drawn a small wishlist for this sector that we believe could give a real boost to it.
Sec 80 ccc increased to Rs 20,000
The only tax benefit that the investors in annuity (commonly known as pension) get is under sec 80 ccc that is limited to Rs 10,000. If this limit were to be increased to Rs 20,000 or more, investors who normally prefer other long-term investments would divert their funds to insurance in pension plans to avail of this tax benefit. This could help the growth of this segment of life insurance in the country.
Returns from annuities to be made tax-free
The returns from annuity (pension) are taxable unlike other life insurance plans that are tax-free. If returns from annuity were made tax-free, it would result in a dual tax benefit (Sec. 88 and Sec. 10 (10D) as is the case with other life insurance policies (endowment, money-back). This would be the right incentive for individuals to go for pension plans.
Sec 80 D benefit to be increased
The premium that is paid for riders like critical illness get tax benefit up to Rs 10,000 under Section 80 D. It would be a boon for insurance companies if this benefit were to be increased to about Rs 15,000. Insurance-seekers would prefer policies with riders rather than plain vanilla plans as the money which they pay towards the riders would also get them tax benefits under sec 80 D apart from the add-on benefits from the policy.
Sec 88 to be enhanced to Rs 80,000 for insurance premiums
The tax benefit available under Section 88 is Rs 80,000 of which PPF/NSC/Insurance can account for Rs 60,000 only and the balance Rs 20,000 is for infrastructure bonds. If life insurance premium becomes eligible for the entire amount under Sec 88 of Rs 80,000 (as is the case with infrastructure bonds) a lot of individuals would willing buy insurance rather than unwillingly buy infrastructure bonds as they are doing right now.
Even if some of these expectations were met whether partly or fully, it would give the right kind of boost to the insurance sector. The least this would do is encourage more people to go for insurance.
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