ON THE RIGHT PATH

The Union Budget presented by the Honorable Union Finance Minister in the Parliament on July 5 2019 is in the mould of Reform and Perform and in the right path shown by the respected Prime Minister. As professionals from the life insurance industry, it is in our capacity to look for avenues and opportunities – direct or indirect – and utilize them for boosting up our new business. Salient Features of the Budget

• Up to Rs 5 lacs taxable income per year after all deductions,  there is no income tax.
• Actually, up to a taxable income of Rs 2 crores, there is no significant change and the tax rates remain largely unchanged.
• The rich and super rich with an income of Rs 2.5 crores, the Surcharge stands increased from 15 to 25%, which means an effective tax rate of 39% as opposed to 35.9%.
• This means that these people will pay a tax of Rs 95.06 lacs as against the present figure of Rs 87.45 lacs- a higher outgo of Rs 7.6 lacs.
• Those with an income of Rs 5 crores and more, the surcharge rate is 37% from the present 15% with an effective tax rate of 42.7%, again meaning that they will pay Rs 2.32 crores from Rs 1.95 crores for an annual income of Rs 5.5 crores- a net increase of Rs 37.32 lacs.
• Those buying affordable housing can save some tax. Interest on a loan taken by a first time buyer to purchase a house valued at Rs 45 lacs, will qualify for an additional deduction of up to Rs 1.5 lacs, raising the total deduction available from Rs 2 lacs to Rs 3.5 lacs, for a self-occupied house. This purchase should be within the period from April 2019 to March 2020.
• Tax deduction up to Rs 1.5 lacs introduced for interest on loan taken during the period April 2019 to March 2020 for purchase of an Electric Vehicle.
• Long Term Capital Gain on sale of residential house property, sold before March 2021 will not face any tax if invested in eligible Start-ups up to the extent of investment made. Beyond this, the LTCG is at the rate of 20%- a provision which was to expire on March 31 2019,  now extended for two years.
• Provisions under IT Act Section 80C allowing deductions up to Rs 1.5 lacs for savings instruments include insurance policies remain the same.
• Standard Deduction has increased from Rs 40000 to Rs 50000.
• Tax free Gratuity limit increased from Rs 10 lacs to Rs 20 lacs.
• Angel Tax-no income tax scrutiny on valuation of Share Issue for Start-ups.

Road Ahead The time has come last year itself not to expect any more income tax rebates under IT Section 80C from the Government of India. Now it is for the life insurance field force to tap wherever a person gets some monetary benefit from the other governmental measures like the increase in Standard Deductions, no income tax up to Rs 5 lacs and so on and divert that excess fund towards life insurance policies. They may have to impress up on the customer the dire need to save for risk coverage, savings for the rainy day, setting money apart for the retirement years and IT Rebate wherever eligible – may be in the same order – instead of frittering away that extra cash the person gets in his/her hands in unproductive expenditure. The life insurance sales person has to strain his/her each nerve to tap this excess potential for more and better new life insurance business for the good of both the customer as well as the agent and of course for the welfare of the entire nation. This is the ‘Right Path’ shown by the Government of India in its Union Finance Budget 2019-2020. Jai Hind. Authored By: R Venugopal Retired Executive Director LIC of India