CHENNAI: The Indian government should make pensions tax-free so that the pension penetration is higher, an insurance industry official said.

Vighnesh Shahane, CEO and MD of Ageas Federal Life Insurance, said that the government ought to make unit-linked insurance plans' (ULIPs') maturity amounts tax-free when the yearly premium is Rs 2.5 lakh or more.

"Our request is to make pensions tax-free in the hands of the customer because the pension premium is already paid through taxable income, to enhance the penetration of pension and to make India a pensioned society, especially since we don't have any social security cover," he said.

He said, the pension/annuity income should be made tax-free in the customer's hands or should permit a deduction for the primary component.

The present ceiling for health insurance premium deductions under Section 80D of the Income Tax Act is merely Rs 25,000, according to Shahane, who also listed other budget wish lists.

He said that the Income Tax Act's Section 80C is crowded with many investment alternatives for tax benefits and that either a separate section for life insurance be added or the current ceiling of Rs 1.5 lakh be raised to Rs 2.5 lakh.
Given the enormous protection gap in the nation, Shahane said, it would be beneficial to at least have a separate section for term life insurance coverage.

"We advise against 18% GST for protection products because it raises the price of term insurance. The availability of the fundamental protection plans under zero-rated GST should be encouraged to promote insurance penetration in the nation " he added.

Shahane said that increasing the tax deducted at source (TDS) exemption limit on insurance commission from its existing level of Rs 15,000 (under section 194 D of the Income Tax Act) will provide insurance agents more motivation.

Markets turned volatile after RBI hiked repo rate by 35 bps

LIC increases stake in 3 Adani Group Entities

Oil prices rose after the Russia price cap pact, with world shares mixed