Budget 2026: Insurance Sector Pushes for Tax Relief, Reforms
Overview
India's insurance sector experts are advocating for significant reforms in Budget 2026, urging tax relief on premiums and increased benefits for preventive healthcare. These measures aim to improve affordability, expand insurance penetration, and strengthen the ecosystem. Calls also include addressing GST input tax credit issues and boosting public-private partnerships to manage risks.
Sector Seeks Fiscal and Structural Reforms
Union Budget 2026 expectations are high as insurance sector stakeholders, including health, life, and general insurers, are advocating for fiscal and structural reforms. Their aim is to enhance affordability, broaden insurance penetration, and fortify India's insurance ecosystem, aligning with the 'Insurance for All by 2047' vision.
Medical Inflation and Tax Burdens
The health insurance segment faces persistent pressure from medical inflation, projected between 11.5% and 14% in India, among the highest in Asia. Srikanth Kandikonda of ManipalCigna Health Insurance noted that while GST exemption on premiums and 100% FDI have aided affordability, rising healthcare costs challenge adequate coverage. He stressed the need for increased public health spending, stronger primary care, and a focus on prevention to reduce long-term expenses and financial strain, alongside enhanced tax benefits for OPD and preventive screenings beyond Section 80D.
Broadening Tax Incentives
Industry voices echo calls for higher tax deductions on insurance premiums. Ajit Banerjee of Shriram Life Insurance Company suggested increasing Section 80C limits or creating a dedicated section for insurance premiums. Rajendra Upadhyaya of Choice Insurance Broking and Shikha Bhatia of IMI Delhi urged revising Section 80D limits significantly upwards, citing double-digit medical inflation that renders current limits inadequate. They propose revised limits ranging from ₹40,000 to ₹50,000 for individuals and ₹80,000 to ₹1 lakh for senior citizens.
GST and Input Tax Credit Challenges
Narendra Bharindwal, President of the Insurance Brokers Association of India (IBAI), highlighted a structural issue within the insurance value chain. While GST exemption on retail health and life insurance premiums helps affordability, insurers cannot claim input tax credit on these exempt products. This means GST paid on distribution, servicing, and technology costs gets embedded in premiums, hampering investment in penetration and digital infrastructure. Bharindwal recommended allowing input tax credit or a calibrated offset mechanism.
Sectoral Focus and Future Reforms
Beyond GST adjustments, experts foresee broader structural changes. Calls include stronger public-private partnerships for various risks, support for micro-insurance, distribution reforms, and clarity on composite licensing. Life insurers seek a revisit of tax concession limits to match rising incomes and evolving needs. Sharad Mathur of Universal Sompo General Insurance emphasized the need for a time-bound roadmap with shared digital insurance infrastructure and cost-efficient distribution frameworks for the 'Insurance for All' goal, alongside sustained funding for insurance literacy.
Premium Financing and Risk Pools
The insurance premium financing segment views Budget 2026 as a potential inflection point, seeking policy signals that support deeper coverage, improved credit access, and clearer digital lending norms. Subrata Mondal of IFFCO-TOKIO General Insurance also called for higher allocations to crop and climate risk insurance and the creation of disaster and catastrophe insurance pools to bolster resilience against climate volatility.
