*Please note that the quotes shown will be from our partners

Budget 2016: Insurance Sector Gets Special Attention

This year’s Union Budget has done especially well in addressing the needs of the Insurance sector. Small investors and tax payers especially, can rejoice in the many positive changes proposed by the Finance Minister.

Both growth-oriented and realistic, it has artfully managed to strike a fine balance between the economic, social and political aspects that govern the nation. It will also provide more options to insurance buyers in the country, and portray India as a sustainable economy.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Tax benefit is subject to changes in tax laws

One of the most important announcements made was the new health insurance scheme or the National Health Protection Scheme (NHPS), which aims to protect one-third of the country’s population against hospitalisation expenses. Unexpected health problems are the biggest cause of unforeseen, emergency out-of-pocket expenditure, pushing lakhs of households below poverty line on a yearly basis. In order to provide more stability to those poor and economically weak families, a health cover up to INR 1 lakh per family will be provided. In addition, senior citizens who are 60 years and above who belong to this category will receive an additional top-up package of up to INR 30,000. Provision of affordable generic medicines has also been made, with plans to open 3,000 Jan Aushadhi stores across the country.

Farmers will also be given a crop insurance cover under the Pradhan Mantri Fasal Bima Yojana (PMFBY), scheme, where a sum of INR 5,500 crores of the budget has been allocated. Farmers will have to pay a nominal amount of the insurance premium which will fortify them in the event that they should suffer any losses during any stage of farming activity—from the sowing of crops to the post-harvest season.

The insurance sector has previously petitioned for a removal of the service tax on insurance products. Though the Finance Minister has not altogether removed service tax, he has proposed that services provided by EPFO to employees, and Annuity services provided by the National Pension Scheme (NPS) which is regulated by PFRDA, be exempt from service tax. Till date, single premium annuity policies by NPS had a composite rate of service tax at 3.5%, and from the 1st of April onwards, this will be reduced to 1.4% of the premium that is charged.

Furthermore, service tax will also be exempt on general insurance services that are provided under ‘Niramaya Health Insurance Scheme’. Currently, it was being levied a tax of 14%. This has proven to be a great relief to individuals suffering from, and families having dependents with disabilities like Autism, Mental Retardation and Cerebral Palsy, to name a few. Individuals and families will now receive higher returns as the premium amount will decrease, while the coverage amount remains the same.

As for life insurance policies, the rate of tax deducted at source has been reduced by half, to 1% from the current 2%, in cases where the maturity amount is over INR 1 lakh.

The Finance Minister has proposed that FDI norms for the insurance sector be significantly relaxed, for the purpose of facilitating the ease of doing business for foreign investors and domestic recipients alike. It was proposed that foreign investment be allowed through an automatic route up to 49%, subject to guidelines issued on Indian Management and Control, to be verified by the regulators. 

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Another announcement made in this year’s budget is that general insurance companies that are owned by the Government will be listed in the stock exchanges. This announcement has been made for the purpose of ensuring the highest levels of accountability and transparency.

  • Allocation for health insurance: INR.1,500 crores—This marks an increase of: 152% for the NHPS
  • Arun Jaitley announced a cover of INR 1 lakh per family, with an additional cover of INR 30,000 for senior citizens
  • Plans to open 3,000 Jan Aushadhi stores
  • INR 5,500 crores allocated for crop insurance cover under the PMFBY
Written By: PolicyBazaar - Updated: 03 May 2021
You May Also Want to Know About
How to Check LIC Policy Status, Details, Statement via Online/SMS/Call
How to Check LIC Policy Status, Details, Statement via Online/SMS/Call Last year, Mr. Rajiv Verma bought a Child LIC policy to provide financial security for his kid's future. However, due to time constraints or negligence, he forgot to pay its ...
LIC Online Premium Payment
LIC Online Premium Payment The Life Insurance Corporation of India is one of the most recognized and trustworthy names in the Indian life insurance industry. LIC, established in 1956, has been providing various insurance products to millions of ...
How to Check PLI Status?
How to Check PLI Status? Dating back to February, 1884, PLI (Postal Life Insurance) is one of the oldest life insurers in the country. Started as a welfare scheme to provide benefits to the employees of the Postal department, PLI has really come...
LIC Login: LIC Customer Login Process at Online Portal
The LIC login portal is user-friendly. With the LIC online login facility, customers can easily avail themselves of the different facilities at the comfort of their homes or offices from anywhere in the world. All you need to do is create the use...
Life Insurance: Checking Policy Status
Life Insurance: Checking Policy Status Buying life insurance policy is the first step towards building a corpus amount for the future. It takes many permutations and combinations to actually choose a life insurance policy, analyzing its benefits...
Download the Policybazaar app
to manage all your insurance needs.