As part of their proposal for the upcoming Union Budget, which will be published in February, the life insurance sector has suggested that the government establish a separate bucket for tax rebates under section 80 (C) and make annuities tax-free for the benefit of subscribers.
According to Karthik Raman, CMO and Head – Products, Ageas Federal Life Insurance, the Rs 1,50,000 limit for tax refunds is a rather crowded bucket that does not leave much room for life insurance payments (to obtain the full advantage of tax exemption).
“We want to establish a distinct bucket from the tax advantage in terms of refund since section 80 (C) has a ceiling of Rs 1,50,000 and everything falls under that, even PPF, and if one has a house loan, it is effectively gone. As a result, we’d want to set aside money for investing in life insurance in order to get tax breaks “On behalf of the industry, he said.
On February 1, Finance Minister Nirmala Sitharaman will propose the general budget for the upcoming fiscal year. In addition, the industry would want annuity products to be eligible for tax breaks.
The annuity is now taxable in the hands of the receiver or annuitant. Because an annuity is considered salary, it is taxed. However, an annuity is often obtained by persons who have been shifted out of their normal source of income and see an annuity as an additional source of income.
“The expense of life is only rising, and taxing them doesn’t seem fair. We’d want to ask (the government) whether an annuity may be regarded under Section 10 (10D) and rendered tax-free. Section 10 (10D) of the Income Tax Act exempts life insurance benefits, including incentive payments. These are the two things that the business would be really grateful if the government would consider “Raman said.
He encouraged the government to make a start in that direction and to pick up where it left off before the insurance premium was amalgamated within the general tax exemption limit of Rs 1,50,000 under Section 80. (D).
“As a result, a separate bucket may be constructed for life insurance (premium). And, in the next year and beyond, if the government believes it is a vital investment, and given the magnitude of the pandemic’s effect, it will urge people to consider life insurance as a sound investment “Further, the official said.