Summary of this article
Insurers seek higher, simpler tax incentives for protection.
Term insurance deduction proposed outside Section 80C.
Annuity tax relief urged to strengthen retirement security.
As the Union Budget 2026-27 approaches, experts from the insurance industry are hoping mainly for one key change: making long-term financial protection and retirement security easier and more rewarding for households.
Sumit Madan, Managing Director and Chief Executive Officer, Axis Max Life Insurance, said that the next phase of India’s growth story must be built on stronger household resilience.
"As India moves into its next phase of economic growth, strengthening household financial security must become a central priority of the Union Budget FY27,” Madan said.
Madan believes incentives need a rework to revive long-term savings and deepen insurance adoption. He urged for tax incentives for insurance under the old-tax regime Income-tax Act 1961.
He called for “simpler, higher, and inflation-aligned tax incentives under Sections 80C, 80CCC, and 80CCD,” suggesting that the present framework needs to better reflect rising costs and savings needs. Madan highlighted the need for a separate deduction to promote protection products.
“Equally important is the introduction of a separate tax deduction for pure term insurance, outside the existing 80C framework,” he said, pointing to India’s “persistent protection gap.” In his view, life insurance must be treated as a foundational pillar of a “resilient, sustainable, and future-ready $5 trillion-plus economy,” Madan added.
Retirement planning is another major theme. Subhrajit Mukhopadhyay, Deputy CEO and ED, Edelweiss Life Insurance, said the government’s recent reforms have signalled strong intent, including GST-related changes and opening up 100 per cent FDI in insurance, which he believes has improved the industry’s outlook.
“In the upcoming Union Budget FY 2026-27, we expect a continuation in the government's efforts to bring ease of business, boost capital inflow into the Indian economy, and further the agenda of ‘Insurance for All 2047’,” Mukhopadhay said.
Mukhopadhyay flagged the need for support for pension and annuity products, particularly as India’s ageing population expands. With about 160 million people above the age of 60, he explained that India is home to the second largest elderly population in the world. This number is likely to increase to 230 million in 2036, about 15 per cent of the total population, according to government estimates. Additionally, the need becomes more pertinent as the average life expectancy in India has increased about 14 years between 1990 and 2025, he adds.
“This vast ageing population underlines the burgeoning pension and annuity market in India,” he says, adding that annuities address the risk of outliving one’s retirement corpus by providing steady income “throughout one’s lifetime,” Mukhopadhyay said.
However, he pointed out a key deterrent: “Currently, an annuity is completely taxed in the hands of the customer.” A targeted tax break, he suggested, could encourage more people to opt for annuities and strengthen retirement security.
Taken together, the message from the financial protection ecosystem is clear: simplify incentives, reward long-term behaviour, and make protection and retirement products more accessible for the average saver. For insurers, the demand is simple, they want the Union Budget to make protection and pensions more affordable and more attractive to Indian households.
