The life insurance penetration rate in India is now 3.7%. As the industry continues to play its role, insurers are anticipating some key changes to the current tax system that will help increase insurance penetration into Indian markets and attract as many people as possible to insurance.
Under section 80C of the 1961 Income Tax Act, taxpayers can currently benefit from a maximum exemption of up to Rs 150,000 for investments made through life insurance, bank deposits and other income, but it is difficult to use all possible deductions under the current limit.
Realizing the utmost importance of life insurance, it is critical to either consider creating a separate deduction section for premiums paid on life insurance policies or increasing the current limit in Section 80C from Rs 1.5 million to Rs 3 million.
Implementing either of the two will allow clients to view life insurance as much more important than just a tax-saving tool, and will also encourage people to buy life insurance to meet their future financial goals. Increasing investments in long-term financial products such as life insurance also means increasing the availability of long-term capital in the financial system as a whole, which is necessary at the moment so the economy gets back on track.
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