Union Budget 2023-24: What it Holds for the Insurance Sector?

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Where and when to watch FM Nirmala Sitharaman’s speech LIVE on Union Budget 2023-24

Finance Minister Nirmala Sitharaman is presenting the Union Budget 2023 at 11 am today, February 1, 2023, at the Parliament in Delhi. This is going to be the fifth Budget presentation made by the minister. This year, the Budget has arrived ahead of the nine state assembly polls to be held this year.

When will the Budget speech be presented?

The Budget 2023 will be presented on February 1, 2023, (Wednesday) at 11 am. It will start with a speech by FM Sitharaman at Parliament of India in New Delhi.

Where to watch the budget presentation live?

The budget speech can be watched live on Lok Sabha TV (Sansad TV), the official parliament channel, and on Doordarshan.

Key Announcements in the Budget for the Insurance sector in previous years

Budget Highlights of 2022-23 pertaining to healthcare and insurance sector are mentioned below:

• One of the top announcements of the India budget 2022-23 was the rollout of an open platform for the National Digital Health Ecosystem. The rollout enabled the digitization of data on health and healthcare providers and gave exclusive access to health facilities on a virtual platform.
• The exclusive health identity system helped the insurance companies in assessing risks better, as well as in reviewing premiums and claims in a better way.
• The budget highlighted the government commitment to building a strong health system

Budget Highlights for 2021-22 pertaining to the healthcare and insurance sector are mentioned below:

• Hike in FDI limits
• Discrete tax deduction on the payment of life insurance premium
• Reduction in tax on earnings and gains
• Improvements for the non-life insurance industry

Expectations of the Insurance sector from Budget 2023-24

• Budget 2023-24 may not make any major change in the taxation system other than fine-tuning the existing direct and indirect taxation regimes
• Health insurance providers emphasized that a special focus should be given to easier access to healthcare financing with regard to the affordability of insurance and its simplicity
• Recommendations are to lower the prevailing GST rate on health insurance
• The insurance sector proposes to enhance FDI limit up to 100 %
• High anticipation is there about the budget 2023 that it would take care of higher exemption of tax under section 80D from the current limit of INR 25,000 to INR 1 lakh

Budget 2023-24: How the Insurance sector fared?

As the cabinet met at the parliament today to discuss the Union Budget for 2023-24, all eyes were glued towards Union Finance Minister Nirmala Sitharaman who was presenting the Budget live.

Here are some highlights of the budget 2023-24 pertaining to the insurance and healthcare sector:

Budget 2023 highlights

Below are the key highlights of budget 2023-24 announcements with regard to the healthcare and insurance sector:

• No changes have been made in the old tax regime
• The new tax regime is likely to become the default tax regime. Though tax payers would still have the option to opt for the old tax regime
• No tax would be levied on income up to Rs 7.5 lakh per annum under the new tax regime
• Government also proposed the reduction of highest surcharge rate to 25% from 37% under the new tax regime
• The government proposes to remove tax-free status on certain insurance policies with premium above INR 5 lakh

New Income Tax Slabs Under New Tax Regimes

Let’s take a look at the latest update on New Income Tax Slabs Under New Tax Regimes.

• Rs 0-3 lakh: Nil
• Rs 3-6 lakhs: 5%
• Rs 6-9 lakhs: 10%
• Rs 9-12 lakhs: 15%
• Rs 12-15 lakhs: 20%

As always, the insurance sector like other sectors has waited with high expectations from the Union Budget for the year 2023-24. Lowering of the surcharge in the highest bracket of income-tax from 37 % to 25 % has been a real respite to the highest tax payers and to taxpayers under the new tax regime.

Further, salaried individuals are also likely to gain from the budget with low-income tax rates and revised slabs being introduced under the new tax regime. The income tax-rebate extended on income up to INR 7 lakhs under the new tax regime is another boost for taxpayers to encourage them to accept the new tax regime. Overall, the new tax regime has been revamped and made better, thereby making exemptions of the old tax regime in a way superfluous.

The union government also proposed to set a cap on deductions received from capital gains on residential houses investments to INR 10 crore under different sections such as 54 and 54F. This cap has been similar to the one where the government proposed limiting the income tax exemption from policies with a very high value of INR 5 lakh and above.

The government also proposed to double the limit for deposits under SCSS or Senior Citizen Savings Scheme to INR 30 lakh and the MIAS or Monthly Income Account Scheme to INR 9 lakh from INR 4.5 lakh and from INR 9 to INR 15 lakh in case of joint account.

With the new tax regime becoming the default one, the government has accordingly taken a number of measures to make it all the more appealing.

Overall, the limiting exemption on income tax from the proceeds of insurance policies might impact the insurance companies hugely.