Insurance Industry Anticipates Major Tax Incentives and Amendments in Upcoming Budget 2025

As India prepares for the much-awaited Union Budget 2025, the insurance industry is eagerly anticipating significant reforms and tax incentives that could reshape the sector. With Finance Minister Nirmala Sitharaman set to present the budget on February 1, stakeholders are looking for measures that will enhance insurance penetration, affordability, and accessibility across the country.

Key Expectations from the Budget

Industry leaders have outlined several key expectations that they believe will drive growth and innovation in the insurance sector:

1. Increased Tax Deductions: Insurers are advocating for an increase in the deduction limit under Section 80D for health insurance premiums. This limit has remained unchanged for nearly a decade, and with rising healthcare costs, a revision is deemed necessary to encourage more individuals to invest in health coverage.
2. Separate Tax Benefits for Term Insurance: There is a strong demand for the introduction of a separate tax exemption for term insurance premiums. This move is expected to incentivize more people to secure adequate life insurance coverage, thereby narrowing the protection gap in India.
3. GST Reduction on Premiums: The current Goods and Services Tax (GST) rate of 18% on insurance premiums is seen as a barrier to affordability. Industry experts are calling for a reduction in GST rates to make insurance products more accessible, particularly for low-income groups.
4. Insurance Act Amendments: The anticipated Insurance (Amendment) Bill aims to allow 100% foreign direct investment (FDI) in the sector, which could significantly bolster capital inflows and enhance competition. This amendment follows previous reforms that raised the FDI limit from 49% to 74%.
5. Streamlined Regulations: Stakeholders are also pushing for regulations that would allow insurers to offer both life and non-life policies under a single composite license. This change would streamline operations and improve customer service by enabling insurers to provide comprehensive solutions.
6. Support for Micro Insurance: With a focus on expanding coverage to underserved segments of the population, there are calls for reduced capital requirements for micro insurance firms. This would facilitate greater participation from smaller players in the market.

The Insurance Regulatory and Development Authority of India (IRDAI) has set an ambitious vision of “Insurance for All by 2047,” which emphasizes the need for innovative solutions to enhance coverage across various demographics. As part of this vision, stakeholders are exploring ways to leverage technology and digital platforms to improve distribution channels and customer engagement.Anup Rau, Managing Director and CEO of Future Generali India Insurance Company, emphasized the importance of affordability in driving accessibility: “Affordability will drive accessibility, thereby enhancing reach and penetration of insurance across the country.