The government should make pensions tax-free because the pension premium is already paid through taxable income, said Ageas Federal Life Insurance CEO and MD Vighnesh Shahane as his Budget 2023 wishlist.
He said, the Indian government should also make the maturity amount under unit linked insurance policies (ULIP), where the annual premium is ₹2.5 lakh or more, tax free.
“To increase the penetration of pension and to make India a pension society, especially since we don’t have any social security cover, our request is to make pensions tax-free in the hands of the customer because the pension premium is already paid through taxable income,” Shahane said.
The proceeds of the pension/annuity should be made tax-free in the hands of the customer or to allow deduction for the principal component, he added.
On the other hand, if we could have a separate bucket for pensions in the range of Rs. 50,000-75,000 that would help to level the playing field with NPS, he said.
While listing out other budget wish lists, Vighnesh Shahane said there should be a higher deduction limit in the case of health insurance premium under Section 80D of the Income Tax Act while the current limit is only ₹25,000.
Currently, Section 80C of the Income Tax Act is cluttered with many investment options for tax benefits, and there should be a separate bucket for life insurance policies or the limit be increased from ₹1.5 lakh to ₹2.5 lakh, he said.
Further he added, at least a separate section for term life insurance policies would be helpful given the huge protection gap in the country.
Raising the tax deducted at source (TDS) exemption limit on insurance commission (under section 194 D of the Income Tax Act) from the current level of Rs. 15,000 would provide a greater impetus to insurance agents, he said.
Moreover, "We recommend zero-rated GST for protection products as 18 percent GST makes the term plans costlier. To increase insurance penetration in the country, the basic protection plans should be made available under zero-rated GST," Shahane added.