The upcoming Union Budget 2025, scheduled for February 1, will be presented by Finance Minister Nirmala Sitharaman, Experts from the industry concerning the “Insurance for All” are anticipating reforms to propel India towards its goal. Increasing insurance penetration and financial inclusion objective announcements are expected by the insurance sector.
Policyholders Tax Incentives
Enhancement of tax deduction limits for life and health insurance premiums is one of the most awaited reforms:
Section 80C Enhancements: Insiders from the industry recommend raising the tax deduction cap u/s 80C which at present permits a maximum exemption of ₹1.5 lakh. A separate, exclusive limit for term insurance and pension policies is indeed advocated.
Section 80D Advantages: The sector is forcing for the expanded tax incentives u/s 80D where the present exemption for health insurance premiums varies from ₹25,000 to ₹50,000.
The industry expert noted that such amendments can enhance life insurance penetration, motivating more people to secure their financial future.
GST Reduction on Insurance Premiums
A barrier of 18% Goods and Services Tax (GST) on life and health insurance premiums opposes affordability. Although the GST Council postponed making a decision on lowering this rate at its 55th meeting, expectations are still strong for a possible announcement in the forthcoming Budget.
Lowering GST on health insurance premiums while keeping the ITC for the industry can direct to a lesser cost for the policyholders, said the CFO and Executive Director of HDFC Life Insurance.
The Group of Ministers (GoM) is still discussing with insurance regulators about this issue, and any relief offered would greatly enhance the accessibility of insurance products.
Required Basic Term Life Insurance Coverage
The introduction of mandatory basic term life insurance coverage for all formal employment is another transformative proposal similar to the Employees’ Provident Fund (EPF).
For the dependents the same measure can ensure financial security in case of an untimely demise, particularly rectifying the insurance penetration, ACKO Life Insurance spokesperson mentioned.
Sufficing the Insurance Gap
The insurance penetration in India is increasing slowly but it still lags behind global standards. These anticipated reforms tax benefits, reduced GST, and mandatory term insurance can play a significant role in achieving the vision of the government of “Insurance for All” by 2047.
The Union Budget 2025 through such announcements can serve as a transformation for the insurance sector marking the way for wider financial inclusion and improved economic stability for Indian families.
