When many major economies are witnessing massive contraction, India is growing at around 7 per cent and remains one of those very few having any real chances of clogging a faster growth rate.Despite this optimism, there are growing concerns around the need for increasing the spending in social and infrastructure sectors.Although, the present government has made some bold moves for bringing more people under banking and insurance coverage, a lot more still needs to be done.
By providing some tax exemptions and deductions in this year’s Union budget, the government can encourage private-sector insurance and other financial institutions to supplement its efforts in boosting infrastructure spending and financial inclusion.Here goes my wishlist for 2016 Union budget.
1. Exempt insurance premium from service tax:
At present, an insurance policyholder has to pay 14.5 per cent service tax and a 0.5 per cent Swach Bharat cess on health and term insurance premiums.
Exempting these premiums from service tax will reduce the cost of insurance policies and boost much-needed increase in health and term insurance coverage.
2. Increase tax exemption limit on health insurance:
Currently, the upper limit of deduction available for health insurance premium under Section 80D is Rs. 25,000.
In case of senior citizens, the upper limit of deduction is Rs. 30,000. However, the present limit may prove to be insufficient for, say a 50 year old person wishing to buy a cover of Rs. 5 lakhs.
Given the high inflation in healthcare costs (20 per cent according to some estimates), the government should raise the limits under Section 80D to encourage people to buy larger covers for dealing with high medical inflation.
3. Introduce tax benefits on home insurance:
Home insurance remains probably the most neglected form of insurance in India.
As a result, most people remain vulnerable to financial damages from natural calamities, such as floods and earthquakes.
Tax exemptions for home insurance premiums will encourage homeowners to insure their homes and secure their finances from natural disasters.
4. Create separate limit for insurance, over and above Section 80C:
Budget 2016 should introduce separate tax exemption limits for insurance plans from mutual funds and pension plans, over and above Section 80C.
At present, Section 80C covers a wide range of tax saving avenues, such as tax-saving deposits, VPF, EPF, PPF, NSC, ELSS and home loan principal repayment.
Separate exemption for insurance plans will encourage people to buy insurance and thereby promote social security.
5. Uniform KYC for all insurance products:
One of the reasons why people shy away from buying or renewing insurance is because it involves too much paperwork, especially in terms of submitting KYC.
What makes this procedure even more painful is that you have to repeat this procedure every time you buy a new policy, even if you buy the second one from the same insurer.
With the government taking steady steps towards digitizing India, it only makes sense to include insurance under this umbrella.
Uniform KYC policy would declutter paperwork at the time of buying policy. In addition, it would also accelerate penetration of insurance in underpenetrated regions of India.
Curated from Exempt Insurance Premium From Service Tax