In the Budget for F.Y. 2019-20 there was no increase in exemption for life insurance premium under section 80C. The current maximum exemption is 1.5 Lac which includes exemptions from other savings instruments also.
Life Insurance Industry has been demanding since long for allowing exemption of 1.5 lakh exclusively for life insurance premium and further increase it to 2.5 lakh. It must be noted that in India Income tax exemption is a major boost for life insurance investment. A large number of people take insurance for saving income tax. Rather Life insurance products are sold in India as a measure to save tax. This is also hindering growth of protection products which is the core of life insurance concept. However offlate term insurance has been gaining popularity among the millennial population. Since the government is also focusing on insurance sector the increase in exemption would have been a major boost.
IRDAI has mandated that in case of policyholders who wish to stake total loss claim in vehicle insurance will now have to obtain a certificate of cancellation of registration. In the Budget the government has also amended TDS rules on receipts from life insurance policies. It has made two changes. Firstly, the rate of TDS shall be 5 per cent. Secondly, TDS shall be deducted on the ‘income’ portion and not on the entire amount. This new rate of TDS and its calculation on only the income portion are applicable from September 1, 2019. Any proceeds received before this date will continue to be taxed as they were earlier.
Government is actively pursuing merger of 3 public sector general insurance companies. This will help to consolidate business as well as stem losses and restrict internal competition which is hampering growth of business. However, this will be a complex task as all companies have different sets of products and different exposures which need to be aligned.
