Rajesh Sud’s take on expectations from the Union Budget 2014

New Delhi, 4 July, 2014: India’s growth engine has slowed considerably. FY 2014 was the second year in a row when Indian GDP grew by less than 5%. However, with strong fundamentals the Indian economy has tremendous growth potential. The Government will need to put an effective growth plan in place that will be able to tackle the burgeoning fiscal deficit, tame inflation, maintain a trade deficit level that can be financed by capital inflows and—most important—revive industry’s confidence.
Increase of FDI ceiling in Insurance Industry can bring in the much-needed capital for the growth of the sector and long-term development. The new Government should look at implementing the long pending Insurance Bill amendment. The proposed amendments include increasing the foreign equity cap to 49 per cent as against the current FDI limit of 26 percent. If this is done it will also bring in domain capital which is of critical importance in this phase of growth of life insurance industry.
RBI data suggests that financial savings for Indian households as a percentage of GDP at 7.7 per cent of GDP in 2012-13 has come down significantly from 10.3 per cent of GDP recorded in 2010-11. For household savings rate to pick up, the Finance Minister should provide relief in income tax burden to individuals by rationalising tax slabs and increasing the limit under section 80C. To promote long-term savings habit there is a need to provide separate tax incentive for long-term financial instruments such as life insurance and pension. An additional tax incentive of Rs.1.5 lakh for life insurance and Rs.1 lakh for retirement plans will also help in accumulating small savings for infrastructure projects. Specific to life insurance industry, there is a need to increase the limit of tax deduction at source on annual commission payable to agents from current Rs. 20,000 to minimum Rs. 50,000. There is also a need to rationalise service tax rate on life insurance policies which was increased to 3% on first year premium on endowment policies.
About Max Life Insurance Co. Ltd. (www.maxlifeinsurance.com)
Max Life Insurance, one of the leading life insurers, is a joint venture between Max India Ltd. and Mitsui Sumitomo Insurance Co. Ltd. Max India is a leading Indian multi-business corporate, while Mitsui Sumitomo Insurance is a member of MS&AD Insurance Group, which is amongst the top general insurers in the world. Max Life Insurance offers comprehensive life insurance and retirement solutions for long-term savings and protection to thirty lakh customers. It has a country-wide diversified distribution model including the country's leading agent advisors, exclusive arrangement with Axis Bank and several other partners. Max Life Insurance is a quality business focused on delivering excellence to customers through advice based sale process, customer centric approach to business, financial stability & investment expertise and strong human capital.