The ease of tax compliance, simplification and digitization are the cornerstones of doing business in India today. Infrastructure spending must increase with a focus on sustained growth. The proposals on the Insurance Amendment Act are also expected to be taken up sooner or later, former IRDAI member Nilesh Sathe said during the 2nd episode of “ETBFSI Budget 2024” Live series.
Earlier, Insurance was seen as an instrument to save tax, but the new generation understood that insurance should be bought to cover risk on life and not as an investment tool because there are better options available in the market, he pointed out.
However, there are some people, especially in rural areas, who tend to subscribe to savings-linked insurance schemes, which is why mutual funds or other investment avenues have yet to reach Bharat’s doorsteps while insurers are present at every nook and corner of the country.
Number of people subscribing to insurance policies in general or savings-oriented plans, is sure to go down over a period of time, he said.
“The government thought that insurance should not receive any burden of taxation. For example, if you paid the premium, you would get a tax credit. The bonus you get is also tax-free, and the maturity was also tax-free. Actually the remuneration of insurance policies used to be big enough for those who have paid taxes. But now for a while, all the attractions are leaving and there is no more EEE (Exempt, Free, Sent). ) pattern in insurance, especially since last year’s amendment,” Sathe expressed.
The government also wants to push everyone to the new tax regime and it does not promote tax concessions because of savings. The government has rather failed to push people to the new tax system and going forward, there may be a possibility that the government will completely revoke the older regime, added the veteran insurer.
Asked if the government will give some bailout to the insurance sector as it is clear that the finance ministry does not seem to be in favor of promoting any tax saving schemes, he said it is likely to happen but this is the interim budget. , the industry should not have its hopes high.
One thing he wanted to highlight was that when there was more than 50-60% income tax on corporations, the tax on insurance companies that are in surplus used to be at 14%. But for corporations now, it has been reduced to 25-30% of tax effectively, but a similar reduction has not been given by the government for insurance companies. However, they must continue to pay tax at 12.5%.
This is one major anomaly that the government has not looked at because insurance itself is very capital intensive, unlike mutual funds or even banks for that matter.
Second, 50% of investable funds of insurance companies are poured into government securities, which indirectly help the government to raise funds at a substantially lower interest rate.
“So some kind of concession should be given to the insurers, but the government is in no mood to give it,” he said.