As of now, the exemption of life insurance premium under 80 D is clubbed with a number of other equity-linked schemes
Insurance companies have asked the finance minister to exempt life insurance premiums from the taxable income by giving it a separate window like the National Pension Scheme (NPS).
Investments of up to Rs 50,000 into the NPS are exempt from income tax under a special window.
As of now, the exemption of life insurance premium under 80 D is clubbed with a number of other equity-linked schemes.
The companies have also asked the FM to lift the 15% service tax specially on health insurance schemes, as it is an essential service and health costs in India are spiralling.
V Manickam, secretary of Life Insurance Council (LIC), an umbrella organisation of life insurance companies, told DNA Money that life insurance firms have so far invested about Rs 15 lakh crore into government bonds up to March 2016 and another Rs 3 lakh crore into housing and infrastructure. "Only the remaining corpus is invested into equity investments where the returns are higher. We have sacrificed about Rs 30,000 crore by the investment into government bonds, as at any given point in time the investment into these instruments gives 2% less returns than the corporate investments," said Manickam.
All life insurance companies are mandated to invest about 50% of the investible surplus into government bonds and another 15% into infrastructure projects and housing sector. Only the remaining corpus of 35% is left to the discretion of the insurance companies. And the non-performing assets of the sector are only Rs 18,000 crore.
R Chandrasekhar, president of the General Insurance Council (GIC), said, "In view of the large number of natural calamities, we are also seeking a small exemption from the premium paid towards property and personal accident so that these products become popular and the people are not left hapless."
The other demands of non-life companies are exempting the sector from service tax, which is a long-standing demand of companies like LIC and other smaller players which say insurance should be considered an essential service. Health insurance companies want the deduction limit under Section 80D for individuals and families increased to Rs 50,000 from Rs 25,000.
Currently, if one purchases a health insurance policy for self or spouse or children, the tax deduction benefit is of up to Rs 25000 of the premium paid. When one purchases a health insurance policy for parents (a senior citizen), there is an additional tax deduction benefit up to Rs 30,000. Given the rising medical costs, it would be even more beneficial if they could provide further tax benefits under 80 D.
Ashish Mehrotra, MD & CEO, Max BupaHealth, said, "At present, business loss and depreciation can be carried forward for eight years only, whereas specialised health insurance companies require around 10 years to break even and another 3-4 years to have sufficient profits. For specialised health insurance companies, period of carry forward of business loss and depreciation should be extended to at least 12 years."
V Jagannathan, CMD, Star Health and Allied Insurance, said health insurance should be considered a social necessity. "Also, an exemption in Section 80D would incentivise people to secure their health."
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