Budget 2023: This sector remains one of the most affected post the budget session
On February 1, Finance Minister Nirmala Sitharaman delivered the Union Budget for FY23-24
Insurance is one of the worst-affected industries following the Union Budget 2023. The majority of the stocks are down by the low double digits. There are a few reasons for such price movement. Initially, it was expected that the GST levied on insurance premiums would be eliminated in this budget. The Finance Minister had different intentions, and no such relaxation was granted.
On February 1, Finance Minister Nirmala Sitharaman delivered the Union Budget for FY23-24, which included reforms to tax slabs for the new tax regime. The tax rate is 0 per cent for those earning less than Rs 3 lakhs, 5 per cent for those who are earning between Rs 3 and 6 lakh, 10 per cent for that earning between Rs 6 and 9 lakh, 15 per cent for those who are earning between Rs 9 and 12 lakh, 20 per cent for those who are earning between Rs 12 and 15 lakh, and 30 per cent for those earning more than Rs 15 lakhs.
The new tax regime would be the default going forward, although assessees would still have the option to choose the previous tax regime. In addition, the income tax rebate maximum has been raised from Rs 5 lakh to Rs 7 lakh under the new tax regime. However, the new tax structure would not allow any income tax deductions that were previously accessible.
Tax deductions were available under the old tax regimes under sections 80C, 80D, and 80G. As a result, the majority of taxpayers chose insurance in order to claim the income tax deduction under Sections 80C and 80D. However, under the new tax regime, there would be no deduction for opting for insurance.
Most insurance companies may see a decrease in revenue from insurance premiums as a result of this. Furthermore, when insurance plans mature, the proceeds, including bonuses, are tax-free if the premium paid during the policy's duration is less than 10 per cent of the actual sum assured. This exemption is now limited to insurance premiums of up to Rs 5 lakh.
This would be a disadvantage for life insurers when it comes to high-value insurance, particularly market-linked policies. According to the Budget, high-net-worth individuals have been taking advantage of this exemption.
The most affected insurance stocks in today's session were General Insurance Corporation of India (down 12.42 per cent), ICICI Prudential Life Insurance Company Ltd (down 10.97 per cent), and HDFC Life Insurance Company Ltd (down 10.96 per cent).