Extension of income tax benefits to annuities and the lowering of GST rates to increase affordability are topmost on the wish list of budget proposals of insurance companies.

At present investments under the National Pension Scheme (NPS) attract an additional Rs 50,000 tax exemption under section 80CCD(1B) of the Income Tax Act, which is over and above the Rs 1.5 lakh limit under section 80C.

In annuities of LIC or other insurers, specifically set up for pension, there is a deduction available under section 80CCC, but with a catch.

The aggregate amount of deduction available under sections 80C, 80CCC and 80CCD (notified government pension schemes) of the Income Tax Act is limited to Rs 1.5 lakh as per section 80CCE of the Act.

With 80C already including a wide gamut of options such as provident fund, small savings schemes, equity-linked savings scheme and home loan principal among others, the limit is most often exhausted by taxpayers.

"Many Indians don't save enough for their post-retirement life, and there remains a huge gap between the funds available and the funds needed for a peaceful retirement," Prashant Tripathy, MD and CEO, Max Life Insurance, said.

"It is proposed to the government to consider extending the application of the current Rs 50,000 tax exemption for the National Pension Scheme under section 80CCD(1B) to pension and annuity plans of insurance companies to provide a more level playing field for such similar products."

"The government may consider extending the tax benefit of Rs 50,000 offered on NPS under section 80CCD(1B), which is over and above Rs 1.5 lakh limit of 80C, to annuities. They are the only solution, which provides complete protection from the perspective of living longer by providing a regular flow of income throughout one's lifetime," said Sumit Rai, MD and CEO, Edelweiss Tokio Life Insurance.

The insurers are also in favour of lowering GST rates both on life and health insurance policies.

"It is suggested to consider zero rating of pension and annuity plans, i.e, setting GST rate at 0 per cent for the said plans, which will also help lessen the tax load for people receiving pensions and thus enhance financial security for more citizens," said Tripathy.

"Penetration of health insurance continues to be very low. More than 50 per cent of healthcare expenses are met out of pocket. The industry would urge the government to consider a reduction in existing 18 per cent GST rate on retail health insurance products," Anand Roy, MD and CEO, Star Health and Allied Insurance.

"The life insurance industry has been requesting for a distinct tax deduction limit, specifically for life insurance, with special emphasis on term insurance category, apart from the existing 80C provisions. This would serve as an incentive for individuals to invest in life insurance products and promote a sense of long term security. There could be an opportunity to also re-look at the taxation framework surrounding pension and annuity products," Pankaj Gupta, MD and CEO, Pramerica Life Insurance.