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We all are eagerly waiting for the annual budgetary plan for the next financial year which will be shared by the BJP-led NDA government in about a week from now. And with Lok Sabha Elections round the corner, it will be an uphill task for the current government to meet all the possible expectations of the taxpayers in this year’s union budget which will be an Interim Budget.
In his recent speech, the Union Minister of India, Arun Jaitley made it quite clear that this Interim Budget exercise will deviate from the general practice of providing a simple Budget, and would rather focus on providing maximum help in all the required sectors. The finance minister through his speech also indicated that this year’s budget will be significantly driven by economic issues that require immediate resolution – a strong indication that the government in power will use its last budget to woo the taxpayers before the upcoming General Elections. Like all other sectors, the many promises made by Arun Jaitley have generated significant interest amongst the insurance industry as well which is expecting some positive tax benefits and regulatory framework in the forthcoming Budget.
Insurance industry experts believe that this year’s budget speech, to be delivered by the Finance Minister, Piyush Goyal will be very important for the insurance sector because, in the year 2018, the industry witnessed several important announcements and regulatory changes. The NDA-lead central government took numerous key decisions in favour of the general public including the inclusion of mental illness in health insurance, changes in rules for motor insurance, and the successful merger of 3 PSU non-life insurers.
Health Insurance Industry
No doubt, many new laws and policies aimed at supporting the governance of the health system in India were introduced by the different governments; unfortunately, most of these laws were not implemented systematically. In the coming budget, the health insurance industry is one the most important sectors that need immediate consideration. As per industry experts, there is an immediate need to spread awareness about the importance of health insurance amongst the people, especially the lower and middle class. Insurers believe that enhancing the tax rebate under Section 80D from the current value of Rs. 25, 000/- to Rs. 150, 000 can be a great start along with a waiver of GST which is currently 18%.
Many insurers are even demanding that the way motor insurance is mandatory under the Motor Insurance Act; health insurance must also be made mandatory by passing a required law. Another major expectation of health insurance industry from the Interim Budget is giving consumers the ability to pay level premiums up to 5 years with multiple payment modes including monthly, quarterly, half-yearly, and limited pay like that in life insurance.
Life Insurance Industry
The current biggest concern surrounding life insurance industry is the lack of required awareness about the true purpose of life insurance in India. What a recent report states is that with a population of more than 133 crore, India’s life insurance penetration rate is even less than 3% of the entire GDP. To address this issue, the life insurance companies are demanding a few alterations in the regulatory system in the upcoming Interim Budget. The insurers are expecting a separate section under the Income Tax Act (over and above 80C), giving tax rebate to the people on premium paid against Pure Life Insurance plans. Also, a GST waiver is demanded on Pure Protection Plans that include both Term Life and Health.
Yet another important change expected from the Interim Budget is in the Unit Linked Insurance Plans – long-term investment-cum-insurance products. Some smart initiatives expected from the government is the reduction of the Lock-in period in ULIPs to 3 years from 5 years (comparable to ELSS) and a GST waiver of charges which is currently 18%. All these regulations are expected to play a major role in the immediate growth of the life insurance sector.
Motor and Travel Insurance Industry
Luckily, as per a recent indication by the Insurance Regulatory and Development Authority of India (IRDAI), the insurance premiums of two-wheelers and four-wheelers may soon come down as from the financial year 2020-21, IRDAI may discontinue the regular practice of fixing the annual premium for third party (TP) insurance for motor vehicles. Like all other insurance sectors, motor and travel insurance industries are also expecting a waiver of the GST from the insurance products being sold by the insurers. Doing this will motivate more and more people to take adequate insurance cover.
Another major concern of the start-ups is receiving income tax notices from the income tax department on the angel funding they received during various series of funding. In general, Angel tax is a term that is used to refer to the income tax payable on capital raised by start-ups via issue of shares. Given the sheer amount of opposition to the angel tax, in this year’s Interim Budget, the entrepreneurs and angel investors are hopeful of a positive change. The investors and entrepreneur are expecting abolition of the tax, reduced taxation rates and/or better clarity on the meaning tax slab.
The views expressed by the author are personal and do not in any way represent those of Times Network.