Insurance News

A push to new tax regime likely to affect life insurance business

[ad_1]

The budget was a mixed bag for the BFSI sector. An impetus to capital investment and higher disposable income in the hands of consumers under the new income tax regime augurs well for credit and consumption demand in the economy thereby helping the banks and non-banking finance companies (NBFCs). But, a lesser incentive to opt for insurance once the taxpayers move to the new tax regime is expected to adversely affect life insurance companies. The stocks of private sector insurers including HDFC Life Insurance, ICICI Prudential Life Insurance, and SBI Life Insurance fell by over 10% following the announcement of budget proposals. The stock of LIC fell by 9%.

Under the old tax regime, taxpayers can avail of a tax rebate upto Rs 1.5 lakh under the section 80 CC and another Rs 50,000 towards the National Pension Scheme. In the latest budget proposals, the finance minister has made the new tax regime more lucrative by revising the tax slabs favourably. Under this regime, taxpayers cannot avail of any rebates or deductions. With the new tax slabs, taxpayers with an income upto Rs 15 lakh and opting for the new tax regime may save 20-25% on the income tax outgo. Given such a significant benefit, there is a possibility that more taxpayers may opt for the new tax regime which means they would no longer buy life insurance policies for tax saving purpose.

In addition, it is proposed that income from only those life insurance policies issued from April 1, 2023, with aggregate premium upto Rs 5 lakh will be exempt. This is likely to affect the offtake of high premium policies. These factors have adversely affected sentiments towards the life insurance sector.

[ad_2]

Source link