Insurance industry is awaiting a big push in the upcoming Union Budget 2025-26 by way of waiver of GST on premiums of health insurance and annuity plans, a separate tax deduction for term insurance and life insurance premium under the new tax regime.
There has also been expectation of removal of the current upper cap on Foreign Direct Investment (FDI) in insurance which is at 74 per cent to allow 100 per cent investment which has been proposed by the Government earlier.
“As India advances toward financial inclusivity and universal healthcare, Budget 2025 offers a pivotal opportunity to further strengthen the health insurance sector. Anticipated policy measures include enhancing accessibility, simplifying tax benefits, and encouraging innovation in insurance products,” the MD & CEO, SBI General Insurance, told businessline.
Initiatives such as Bima Sugam, designed to achieve the goal of ‘Insurance for All by 2047’ are expected to receive regulatory and fiscal support to address the protection gap. “Additionally, the budget is likely to focus on expanding access in underserved regions through government-private partnerships, targeted subsidies, and advancements in digital infrastructure,” he added.
According to the Chief Financial Officer, ManipalCigna Health Insurance, health insurance sector stands at a ‘pivotal’ moment where policy reforms could significantly transform the landscape of healthcare accessibility and coverage in India. “Healthcare costs are rising significantly and expected to double in six years, we urge the government to implement measures that can help make healthcare more affordable for all Indians,’‘ he said.
“We request the government to increase outlay for public healthcare spend, reduce tax burden by increasing the limits under Section 80D of income tax for premium paid for health insurance to ₹50,000 for all and ₹1 lakh for senior citizens. This would substantially reduce the financial burden on families investing in their health and financial wellbeing,” he added.
Pension products
“Anticipated income tax cuts in the upcoming budget could boost disposable income, driving higher life insurance penetration. With the elderly population of over 50 years projected to grow by 22 per cent in the next six years, incentivising pension products is imperative. Aligning tax deductions of life insurance annuity products with the National Pension Scheme (NPS) and addressing the issue of tax on principal component on annuity products can evolve retirement needs effectively,” the MD & CEO Bajaj Allianz Life, said.
“We urge the government to introduce a separate tax deduction for term insurance and extend the tax deduction on life insurance premium under the new tax regime as well. These measures will empower individuals to build robust financial safety nets and advance the vision of ‘Insurance for All by 2047’, thereby fostering long-term financial security and inclusivity,” he said.
“One of our hopes for the upcoming budget is to see support for pension and annuity plans which are key financial instruments for the retirement planning needed to create that stability. Tax support for pension plans offered by life insurers, on par with the National Pension Scheme, will provide both greater choice and allow diversification of assets into multiple pension plans,” the MD & CEO, PNB MetLife said.
“While we applaud the ongoing deliberations on removing GST on term life and health policies, we urge the government to also consider removing GST on premiums for annuity plans to support pensioners,” he added.
