Budget 2023: Increase Limit of Section 80C and Higher Limit for Health Premium

The Union Budget 2023 is just a few days away, and the industry groups, as well as individuals, have prepared their wishlist in the light of the hope that Finance Minister Nirmala Sitharaman will reduce their tax burden.

Increase 80C limit and Separate deduction for Life Insurance

Your protection portfolio must include a pure-term life insurance policy. But many people purchase life insurance policies purely to reduce their tax burden. This is a very powerful hook for life insurance companies to persuade people to purchase life insurance. However, as more instruments became eligible for a deduction under section 80C, the potential for doing so decreased. Up to Rs 1.5 lakh in tax advantages are allowed under Section 80C. The 80C bucket is currently overflowing with payments for life insurance premiums, tax-saving fixed deposits, employees’ provident funds, and other items. Over time, both salaries and employee payments to the Employee Pension Fund (EPF) have increased. Many People are expecting an Increase in the Limit of Section 80C

Annuity and Income parity with NPS

Another request that consistently comes up during pre-budget discussions is a tax exemption for an annuity or pension income, and insurers are confident that the finance minister will pay attention to it this time around. “The primary component of pension income needs to be rendered tax-free in the hands of retirees,” said Shahane. “This will improve penetration of pension plans and make India a pensioned society.” Only the interest portion of annuity income should be taxed, according to insurers, as pension policy premiums are already paid out of taxable income. According to Tripathy, only the accretion and not the principal repayment should be taxed in life insurance annuity/pension products, similar to savings products like fixed deposits. parity with the National Pension System (NPS) which is also a retirement product and another item on the wishlist.

Higher health premium deduction

For health insurance premiums paid, people under 60 can currently claim a deduction under Section 80D of up to Rs 25,000. The cap for older citizens is Rs 50,000. The current level of deduction allowed is insufficient, according to insurers, given the increased awareness of the need for health insurance brought on by the epidemic as well as the rising cost of healthcare. “The current maximum ceiling of Rs 50,000 (for senior folks) should be enhanced to Rs 1 lakh in light of inflation.