Finance Minister Nirmala Sitharaman: Why are insurance companies angry when the budget is good for all sectors? What did the Finance Minister say that the stocks came crashing down?
Insurance Sector in Budget: Insurance stocks fell between 8-12 per cent after Finance Minister Nirmala Sitharaman announced that income tax exemption from income of insurance policies would be limited in certain cases. Sitharaman said that income earned from all life insurance policies, except unit-linked insurance plans (ULIPs), with a premium of more than Rs 5 lakh will be taxed. Please tell, this is applicable for the new policy, which will be issued after April 1, the old rule will continue for the existing policy.
Discount will be given in one condition
The government has basically removed the tax exemption from traditional insurance plans if the annual premium exceeds Rs 5 lakh. However, this does not apply to income received on account of death of the policyholder. The proposal has made life insurance plans less attractive as a tax-saving instrument, providing higher incentives for individuals to shift to the new tax regime, which does not favor tax exemption from investments in insurance plans. While the new tax regime offers lower tax rates, it does not offer any exemption on investment under Section 80C of the Income Tax Act.
New tax regime made attractiveÂ
Preeti Sharma, Partner – Tax & Regulatory Services, BDO India, said that the Finance Minister has made a conscious effort to make the New Tax Regime (NTR) more attractive to taxpayers. He said that NTR will now be treated as a default regime for all taxpayers, but it does not mean that there is one best regime for all. Taxpayers still need to look at their individual status, various investments and expenditure, which are eligible for tax exemption under the old regime. Preeti said, though NTR is the default regime, yet if the same is more beneficial in terms of tax outflow, then the person has the option to opt for the old regime.
