As the Union Budget 2025 approaches, the Indian insurance sector is advocating for significant reforms aimed at improving health insurance penetration and affordability. With rising medical costs and a low number of insured individuals in the country, industry leaders are calling for measures that could stimulate growth and make insurance more accessible to the general population.
Key Demands from the Insurance Sector
- Reduction of GST on Health Insurance Premiums
- Currently, health insurance premiums are subject to an 18% GST, which many experts believe makes insurance unaffordable for a large segment of the population. Reducing this tax rate could encourage more individuals to purchase health insurance policies, thus increasing overall coverage.
- Revisions to Section 80D Tax Exemptions
- Under Section 80D of the Income Tax Act, individuals can claim tax deductions on health insurance premiums. The insurance sector is urging the government to raise the deduction limit from ₹25,000 to ₹50,000 for all taxpayers and ₹1,00,000 for senior citizens. This change would incentivize more people to invest in health insurance.
- Establishment of a Dedicated Health Regulator
- With medical inflation on the rise, there is a pressing need for a regulatory body that can oversee hospital pricing and services. Experts suggest that a dedicated health regulator would enhance transparency and help insurance companies set competitive prices for their products.
- Separate Tax Rebates for Life Insurance Premiums
- The industry is also advocating for distinct tax rebates for life insurance premiums outside of Section 80C. This separation could encourage more individuals to purchase life insurance policies, thereby providing greater financial security.
- Review of Income Tax Slabs and Exemptions
- Adjusting income tax slabs and increasing exemption limits would provide individuals with more disposable income, encouraging them to invest in insurance products. This could significantly boost the market and provide enhanced security for policyholders.
Mixed Performance in the Insurance Sector
The performance of Indian insurance companies in 2024 has been varied. While some companies like General Insurance Corporation of India (GIC) reported a remarkable 44% return, others like Life Insurance Corporation (LIC) saw modest growth at just 7%. Companies such as SBI Life and HDFC Life faced losses, highlighting the diverse challenges within the sector.
Conclusion
The upcoming Union Budget 2025 presents a crucial opportunity for the Indian government to implement reforms that could significantly benefit the insurance sector. By addressing key demands such as reducing GST on health premiums and revising tax exemptions, the government can foster a more inclusive environment that encourages individuals to secure their health and financial futures.
Disclaimer
This article is based on information available as of January 7, 2025. Updates will follow as new developments arise regarding Budget 2025 and its impact on the insurance sector.
