New Tax Regime 2020-21: Income Tax Savings pitch of insurance agents and companies may not work report by Jefferies

New Tax Regime 2020-21: Income Tax Savings pitch of insurance agents and companies may not work report by Jefferies

Indian Insurance agents will have to think beyond tax savings pitch to sell insurance policies in India.

In its recent report, Jefferies, a US based investment banker says that the proposed tax regime is a big disadvantage for the insurance industry.
In Union Budget 2020-21, the central government has announced a new alternate tax regime which will give 20-25% more disposable income to tax payers earning between Rs.10 lakh and Rs.15 lakh, says the Jefferies report.

“Given a high propensity to spend than save for lower-income bracket, we expect many of them to move to alternate tax system irrespective of it requiring giving up of exemptions and deductions,” says the Jefferies report said.

However, given that the alternate tax system does not benefit individuals claiming the full deduction, the impact on growth for insurers may not be that large, Jefferies report says.

The investment banker believes that the move indicates government intention to remove all tax exemptions and move to a simplified tax structure. Therefore, insurance companies and agents will gradually need to shift their selling pitch away from tax-exempt instruments and toward savings and protection needs, says the report.
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