Budget 2026: Insurers eyes higher tax exemptions & boost to retirement savings
Measures to encourage retirement savings, increase premium cap for tax-free maturity for Unit Linked Insurance Products (ULIP) are some of major wish-list of insurers in the upcoming Union Budget for FY2026-27.
“India is facing a widening retirement savings gap, projected to reach $85 trillion by 2050. To tackle this, the Budget this year can extend the ₹50,000 deduction to all pension and annuity products and reduce tax on annuity payouts, making retirement income more tax-efficient and attractive for savers,” B Satishwar, MD & CEO, Bandhan Life, told businessline.
Currently, ULIPs have a ₹2.5 lakh annual premium cap for tax-free maturity. If the Budget raises the ULIP cap to ₹5 lakh, same as traditional products, it will make tax benefits easier to understand for everyone, he added.
According to Tarun Chugh, MD & CEO, Bajaj Life Insurance, with the Union Budget 2026–27, there is an opportunity to strengthen healthcare affordability through higher public health spending and a sharper focus on prevention.
“Introducing separate and enhanced tax benefits for OPD services and preventive health screenings, beyond the current limits under Section 80D, would encourage wider adoption of preventive care,’’ Chugh said.
Catalyst for change
“Achieving the goal of ‘Insurance for All by 2047’ will require a clear, time-bound roadmap supported by targeted policy and budgetary measures. The focus should be on building shared digital insurance infrastructure such as interoperable platforms and cost-efficient distribution frameworks that can be used across the industry to expand reach, particularly among first-time buyers, Sharad Mathur, MD and CEO, Universal Sompo General Insurance, said.
The Budget could also play a catalytic role by allocating sustained funding for insurance awareness and literacy initiatives, especially in rural and low-income regions where adoption remains uneven. In parallel, government insurance and welfare schemes should be structured to enable wider participation from private insurers through more consultative and business-friendly frameworks, said Mathur.
Alok Rungta, MD and CEO, Generali Central Life Insurance said affordability and participation can be improved by simplifying taxation across life insurance products, encouraging pure protection plans and incentivising long-term savings. “Equally important will be policy continuity and regulatory clarity, enabling insurers to plan responsibly and invest for the future,’’ he added.
While the government has already exempted GST on retail health and life insurance — an important step for policyholder affordability — the next challenge lies in addressing the cost burden within the insurance value chain.
“The Budget can also play a role by strengthening risk pooling for health, MSMEs, climate and catastrophe risks through structured public–private partnerships and national risk frameworks, Narendra Bharindwal, President, Insurance Brokers Association of India (IBAI), said.
If Budget 2026-27 aligns fiscal policy with these structural priorities, insurance can meaningfully evolve into a trusted financial safety net for households and enterprises, supporting resilient and inclusive economic growth. Medical inflation continues to be one of the biggest challenges facing India’s healthcare system, projected at 11.5–14 per cent, among the highest in Asia.
“While measures such as the removal of GST on insurance premiums and allowing 100 percent FDI in insurance can improve affordability and sector resilience, rising medical costs continue to put pressure on Indian households,’’ Srikanth Kandikonda, Chief Financial Officer, ManipalCigna Health Insurance, added.
Published on January 19, 2026
