Union Budget Expectations 2025-26: Enhanced Tax Benefits for Life and Health Insurance

Mr. Jude Gomes, MD & CEO, Ageas Federal Life Insurance

Union Budget Expectations 2025-26: Enhanced Tax Benefits for Life and Health Insurance

 

The budget  2025-26 is round the corner. Mr. Jude Gomes, MD & CEO, Ageas Federal Life Insurance penned down his budget wishlist and outlook for year 2025.

 

Life Insurance 2025 – Exploring New Frontiers 

As we reflect on the transformative journey of 2024 and look ahead to 2025, we are heartened by the steady growth of the Indian life insurance sector. With an 11% CAGR over the past three years, the industry has reached premiums of $107 billion, cementing its crucial role in driving financial security and inclusion.

The Assets Under Management (AUM) of the insurance industry form a formidable part of the Indian financial markets, highlighting its significant contribution to capital formation and economic stability. Beyond its economic impact, insurance plays a vital role in ensuring the well-being of society at large by fostering resilience and safeguarding livelihoods.

Despite global economic uncertainties, the sector has shown remarkable resilience by embracing technology and innovative distribution models to cater to a digitally savvy population. Looking forward, we anticipate the sector will continue to grow at 11% to 13%, fuelled by GDP expansion, urbanization, and a rising demand for savings and protection products.

To further accelerate this growth and move towards the vision of 'Insurance for All by 2047,' we urge focusing on key reforms in the upcoming Budget:

 

• Tax Relief for Annuity Plans:

With the retirement savings gap projected to reach $85 trillion by 2050, simplifying or removing taxes on annuity and pension products, including those under the National Pension System (NPS), will encourage greater participation in retirement planning. Extending the ₹50,000 tax exemption for NPS contributions to annuities and pensions will help millions secure post-retirement income.

 

• Enhanced Tax Benefits for Life and Health Insurance:

Many Indian families still face financial vulnerability in case of an untimely loss of a breadwinner. Offering a separate limit for deductions under Section 80C for insurance premiums will make insurance more accessible and attractive, helping bridge the coverage gap.

 

• GST Reforms for Greater Access:

Revising the GST on term life insurance policies will reduce the cost of essential protection plans. A 'zero rating' for schemes like Pradhanmantri Jeevan Jyoti Bima Yojana, smaller policies (up to ₹2 lakh), and annuity products for NPS subscribers will expand access to insurance, ensuring inclusivity and sustaining growth.

 

• Universal Digital Insurance Accounts:

Establishing a government-backed Digital Insurance Repository System to store and manage all insurance policies on a single platform can simplify claims processing and policy management, improving transparency and trust.

 

• Retirement Security Bonds:

Introducing long-term Retirement Security Bonds that combine insurance and guaranteed returns, will encourage long-term savings with tax-free maturity benefits.

 

• Flexible Microinsurance Framework:

Implementing flexible microinsurance guidelines will encourage insurers to design products for underserved rural areas and informal sectors, supported by targeted government subsidies.

 

• Incentives for InsurTech Innovation:

Providing fiscal benefits to companies investing in InsurTech startups and AI-driven solutions will modernize underwriting, claims, and risk management systems.

 

• Public-Private Partnerships for Insurance Awareness:

Allocating funds to promote insurance literacy through joint campaigns involving the government and insurers, especially targeting Tier 2 and Tier 3 cities.

In 2024, Ageas Federal Life Insurance demonstrated its commitment to delivering tailored financial solutions through innovative initiatives such as the launch of the MAGIC Savings Plan, Golden Years Plus Plan (GYPP), and strategic partnerships like our association with PhonePe. These efforts were further complemented by grassroots initiatives like Bima Vahak and Bima Vistaar, along with the digital platform Bima Sugam, underscoring the company's focus on customer-centricity and financial inclusion. We remain agile in adapting to regulatory changes to ensure the success of these efforts. As we reflect on the past year's achievements and challenges, these milestones inspire us to move towards a future where insurance is not just a transaction but a vital component of financial well-being for all, making a meaningful impact on lives.

 

 

Share: