( A critical look at the Union Budget 2018 from the Insurance point of view )

The Union Finance Budget was presented at the Parliament on February 1 2018 by the Honorable Union Finance Minister. No changes in the Personal Income Tax Structure.

For the Senior Citizens

It appears that the Senior Citizens get the maximum benefit this year.

  • Standard Deduction of Rs 40000 given. This will result in a saving of Rs 7195 for a Senior earning Rs 10 lacs per annum.
  • Deduction on interest income from Bank and Post Office Accounts raised from maximum of Rs 10000 to Rs 50000. This could save Rs 14352.
  • The limit on tax free deposits bearing high interest of 8% has been increased from Rs 7.5 lacs to Rs 15 lacs- this means you can add Rs 60000 to your interest income annually. PM Vayu Vandana Yojana  with an assured return of 8% promoted  by the Life Insurance Corporation of India is extended up to March 2020.
  • The rebate on Health Insurance premium for Senior citizens has been upped from Rs 30000 to Rs 50000 under Section 80 D. This will bring in a tax saving of Rs 6000 per annum.
  • The limit of deduction for medical expenditure in respect of certain critical illnesses like AIDS and Malignant Cancers,  has been raised to Rs 1 lac for all Senior citizens under Section 80 DDB. Earlier this limit was Rs 60000 for Seniors and Rs 80000 for Very Seniors.

For the Common Man

Tax exemption of NPS withdrawal up to 40% of total amount, so far eligible only for salary earners, now extended to self employed individuals also.

On sale of immovable property at a price up to 5% lower than the Guidance Value, there will be no tax on the difference. This will reduce hardships for genuine transaction in Real Estate.

Women employees’ PF contribution cut from 12 to 8% of salary for the first 3 years of employment increasing their take home pay.

For Business Man

Corporate tax reduced to 25% for companies with turn over up to Rs 250 crores in 2016-17.

Government to bear Employer’s PF contribution of 12% of wages for new employees in all sectors for the first 3 years.

National Health Protection Scheme- NHPS

The Government has decided to launch this Scheme in the place of Rashtriya Swasthiya Bima Yojana- RSBY- from this year.

The new scheme envisages a cover of Rs 5 lacs for poor and vulnerable families for secondary and tertiary care hospitalization- replacing RSBY which provides an annual care of Rs 30000. The new scheme will cover 40% of India’s population of NEARLY 50 CRORES of people  ( 10 crores families ) thereby making it the LARGEST HEALTH INSURANCE SCHEME in the entire world.

The cost will be borne by the Central and State Governments at the ratio of 60:40%.

Other Welfare Measures

  • Rs 10000 crores allocation for Fisheries and Aqua Culture.
  • Minimum Support Price- MSP- for Kharif crops to be 150% of production.
  • Help for Affordable Homes 51 lacs in Rural and 37 lacs in Urban areas.
  • 8 Crore poor women to be given free Gas connections.
  • Rs 3794 crores allotted for Credit support to MSMEs.
  • Target Mundra Loan of Rs 3 lacs crores during the financial year.
  • Setting 24 new Government Medical Colleges.
  • Allocation of Rs 7148 crores for the Textile Sector.
  • Rs 1400 crores allotted to the Food Processing Sector.
  • Rs 1.48 lac crores allotted to the Railways.
  • Rs 17000 crores allotted to the Bangalore Metro Rail Work.
  • Rs 11000 crores to the Mumbai Transport.
  • Outlay of Rs 2.04 lac crores to the Smart Cities.
  • Digital India gets an allocation of Rs 373 crores.
  • Extra expenditure of Rs 5.97 lac crores proposed for Infra structure.

Good Governance Leads to Good Business

It is not necessary to get different tax exemptions and incentives for saving from the Government every year.

I have enumerated only the positive aspects of the Budget to motivate and encourage the Agency Force.

A good, honest and corruption free Governance leads to a pleasant atmosphere in the society and people will be encouraged to invest in insurance and other savings media. Good measures will result in excess income at the hands of Individuals inducing them to take insurance.

Let us hope and wish for Golden Days for the insurance sector, which contributes a lot for the welfare of the common man in this country.


R Venugopal

Retired ED LIC of India,
Retired Chair Professor National Insurance Academy

References: The Times of India dated February 2 2018 for Figures which I thankfully acknowledge.