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Soon you may be able to get tax deduction on buying an insurance plan for your home or a personal accident cover. The finance ministry is considering a proposal to give additional tax benefits for purchasing these general insurance policies.
The proposal, currently under examination, suggests hiking the tax deduction limit under Section 80-D of the Income Tax Act to provide an additional deduction of at least Rs 10,000 per year for purchasing a home or a personal accident cover.
If the move goes through, an announcement would be made as part of Budget 2013-14 that is to be presented later this month.
At present, the section provides tax deductions up to Rs 15,000 (and Rs 20,000 for senior citizens) per year for mediclaim policies. Tax exemptions are also available for life insurance premiums and investments into Public Provident Fund up to Rs 1 lakh per annum under Section 80C.
"Tax deductions are available for health and life insurance already. There is a view that it should also be provided to general insurers as it improve insurance penetration in the country," said a person close to the development.
Compared to the global average of 1.5 to 4 per cent of the GDP, general insurance penetration in India was at a mere 0.71 per cent in 2011.
The proposal was mooted when general insurers met finance minister P Chidambaram in October last year to discuss strategies for improving penetration of non life insurance products. At the time, the general insurance industry had suggested hiking the Section 80-D limit to Rs 1 lakh per annum and expanding its ambit to include other general insurance products like home cover as well.
Pointing out that insurance products in India are largely bought for the tax breaks they offer and as a means of additional savings, Amarnath Ananthanarayanan, CEO, Bharti AXA General Insurance said, "Steps like removing service tax and increasing the 80D benefit would go a long way in improving the low level of insurance penetration in the country."