Though, majority of pre-Budgetary expectations on taxes and other benefits have remained unfulfilled, Finance Minister Arun Jaitley, in his Budget 2017, presented on Wednesday, has unveiled slew of measures to boost crop insurance, digital payment and cyber security.
The disposable income for individuals earning between Rs. 2.5 – 5 lakh will increase due to the reduction in tax to 5% from the current 10%. This will in turn encourage the lower and middle income strata of people to invest in instruments such as insurance, mutual funds, fixed deposits, say insurer.
“While there were expectations on more reforms around the life insurance sector, some of the other announcements are definitely a step in the right direction. Doing away with 5% TDS on insurance agents’ commissions is a great step forward in attracting and retaining right talent in the sector,” said Vignesh Shahane, Wholetime Director & CEO, IDBI Federal Life Insurance.
Some of the other measures that have implications for the insurance are –
1)The government has accepted recommendations of a Supreme Court-constituted Special Investigation Team (SIT), which had in July last year proposed imposition of a cap on cash transactions above Rs 3 lakh,
2)1.5 lakh health sub centres to be converted to Health Wellness Centres,
3) Rs 1 lakh cr corpus for railway safety fund over five years,
4)A scheme for senior citizens to ensure 8 percent guaranteed returns will be implemented by theLife Insurance Corporation(LIC)
Amitabh Chaudhry, managing director and CEO, HDFC Life said, overall it’s a good budget for the economy which in turn will always have a positive impact on the insurance sector.
M Ravichandran – President at Tata AIG General Insurance, said that the Budget 2017 focussed largely on three themes – agriculture, digital revolution and emphasis on eliminating corruption and black money, while also giving a huge impetus to small and medium businesses.
“With a view to boost the agricultural sector, the government has increased the coverage under the Pradhan Mantri Fasal Bima Yojana from 30% to 40% in 2017-18 and 50% in 2018-19 which will help farmers get insured. Farmers will also benefit further with the government spending Rs 13,240 Cr in FY 18 on crop insurancehe said.”
Also, with the government emphasising further on digital India and cyber security, the Budget will help strengthen a transparent financial ecosystem.
“The slew of measures in the budget, especially the thrust on digital showcases the intent of the government to shift money to formal financial channels and life insurance is a positive – albeit over a longer time horizon. The proposal to abolish FIPB and liberalisation of FDI signals that India remains open for business in a world rapidly shifting towards protectionism,’’ added Chaudhry
Kalpana Sampat, CEO, Swiss Re India Branch, commented that increasing allocations for Fasal Bima Yojana and targeting greater insurance coverage is a positive move to close the protection gap in agriculture. A robust crop insurance framework is an important stepping stone towards food security and financial stability for farmers.
“Finally, the health action plan is an important acknowledgment that the country needs to improve access to health care,” said Sampat,
Jonathan Anchen, Head of Economic Research & Consulting, India, Swiss Re, “It is a balanced budget with several measures to ease the process of doing business. This will positively impact economic growth. The initiatives to incentivise manufacturing, clear red tape for foreign investment, institutionalise the dispute resolution mechanism for infrastructure projects, higher allocation for highways, etc, are very positive steps.
The digital economy too will get a strong boost with high-speed broadband connectivity on optic fibers, and encouraging digital transactions, he said.
Mihir Vora – Director and ChiefInvestment Officer, Max Life Insurance said,” While there are no dramatic items, there are incremental benefits for many constituents viz. taxpayers with income below Rs. 5 lacs, affordable houses for the rural and urban lower-income groups, small corporates with turnover less than Rs 50 cr., higher allocation to the MNREGS scheme for the rural population. There’s a modest growth in infrastructure spending which in our view could have been higher.
“Overall, it continues with the theme of rationalization and continues towards preparedness for the GST regime,’’ he said.
Here’s- according to consulting firm E&Y- who will pay less and who will pay more personal tax following the finance minister’s personal tax proposals in Budget 2017. Once the FM’s proposals are implemented:
- A person with taxable income (after deductions such as Section 80C etc) of Rs 3.5 lakh will pay a tax of Rs 2575 as against Rs 5150 payable earlier.
- Persons with taxable income over Rs 5 lakh up to Rs 50 lakh will pay Rs 12875 less (including the cess saved).
- However, individuals with taxable income over Rs 50 lakh upto Rs 1 crore will be paying a flat surcharge of 10% on the total tax payable by them. For example, an individual earninggross total income of Rs 60 lakh will pay (after availing tax deductions asassumed in the table) Rs 1,45,024 additional tax due to the surcharge. As shown in the table a person with gross total income of Rs 60 lakh who was paying tax of Rs 15,91,865 would now be paying Rs 17,36,889 (after availing deductions and application of surcharge and cess).
- Those with income over Rs 1 crore would continue to pay the surcharge of 15% but would get the meagre benefit of saving Rs 12875 (including saving of cess but excluding the saving on surcharge). For example, a person with gross total income of Rs 1. 2 crore will pay (after availing deductions) Rs 39,65,706 as taxes including surcharge and cess as against Rs 39,80,512 payble earlier.
Jaitley has also proposed to provide relief to an employee subscriber of NPS.
The Budget has proposed to amend the Section 10 so as to provide exemption to partial withdrawal not exceeding 25% of the contribution made by an employee under Pension Fund Regulatory and Development Authority Act, 2013 and regulations made there under.
This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years.
Source: Asia Insurance Post
Date: 1st February 2017