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New budget to impact sales of insurance companies

Due to increase in tax bracket, the number of tax-payers may decrease. increase. May lead to a decrease in number of free policies issued.

Apnainsurance.com Research Bureau

02 Mar 2008

The Finance Minister in his budget raised the taxable income bar from Rs. 1.1 lakh to Rs. 1.5 lakhs.  For women, it was raised to Rs. 1.8 lakh while for senior citizens; it was raised to Rs. 2.25 lakhs.

Prior to the rise in tax bracket, a larger population was a potential consumer-base. Investment in insurance is one of the most popular tax-saving instruments in India. Given the increase in tax bracket, a significant increase is expected in the number of people who do not have to pay taxes.

This will have a negative impact on the insurance industry where the number of fresh policies issued will dip down significantly.

The budget provides for an additional deduction of Rs 15,000 for medical insurance premium paid for a parent. The deduction increases to Rs 20,000 if the parent is a senior citizen. The budget has done away with the earlier mandatory condition that the parent has to be a dependent on the assessee.