Close

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family.

Kotak Guaranteed Fortune Builder

A plan that offers guaranteed income for your future goals.

Amit Raje Amit Raje
Close

Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

Budget 2024 – Impact on Life Insurance Sector

The Budget 2024 introduces a new TDS rate for the life insurance sector, enhancing benefits for policyholders and providing greater flexibility for insurers.

  • 12,275 Views | Updated on: Jul 26, 2024

The Union Budget is a crucial financial document released by the Indian government each year, outlining the government’s plans and expenses for the upcoming fiscal year.

The Union Budget 2024, recently presented by the Finance Minister, expected several provisions that might impact the life insurance sector in India. While no major changes were made to the life insurance sector, it is important to understand the difference in the TDS rate and know that policyholders might be affected by the Budget 2024 directly or indirectly. Here’s a brief overview of budget impact on life insurance.

Life Insurance and Budget Amendments

  • According to the Union Budget proposal, an individual will be required to pay tax on the maturity amount of Life Insurance Plans when the total yearly premium surpasses ₹5 lakh.
  • According to the Budget plan, any budget impact on life insurance policies with maturity proceeds issued after April 1, 2023, has an annual premium of more than ₹5 Lakh (apart from Unit-linked Insurance Policies, or ULIPs) and henceforth be subject to taxation.
  • The annuity income received from a pension plan will be taxed at the marginal tax rate in accordance with the new insurance tax regulations by the Union Budget.

Impact on Insurance Providers

  • Insurance companies will need to adapt to the new regulatory and tax environments. This could involve changes in their financial planning, reporting practices, and product offerings to align with the updated guidelines.
  • While the budget simplifies some regulatory aspects, insurance providers may face increased compliance costs related to new reporting standards and tax regulations.
  • The relaxation of investment guidelines presents opportunities for insurance companies to diversify their portfolios and potentially achieve higher returns. This could lead to more innovative insurance products and services.

Impact on Policyholders

  • Insurance companies will need to adapt to the new TDS rate, which has been reduced from 5% to 2% under Section 194DA.
  • If you are responsible for paying a resident any amount under a life insurance policy, including bonuses, you need to deduct income tax at 2% on the taxable portion of the payout. However, this does not apply to amounts exempt under clause (10D) of section 10.
  • The updated regulatory framework will likely increase transparency in insurance products and services, helping policyholders make more informed decisions.

Policies That Remain Unaffected

  • One of the policies that remain unaffected in the Union Budget insurance is the term insurance, which means that the policyholder can continue to avail of the policy’s benefits and the premium paid without any new updates or changes.
  • ULIPs also remained unaffected in the Union Budget 2024, and the policyholders can continue to enjoy the benefits of life insurance and investment opportunities.
  • The emphasis on Term and ULIP policies in the Union Budget on life insurance is significant as these policies have been gaining popularity in recent years.
  • These policies are considered a cost-effective and efficient way to secure an individual’s financial future and family.
  • The death benefit will not be taxable and will continue as it is now.

Sectoral Growth and Opportunities

  • Enhanced tax benefits and flexible investment guidelines could lead to increased market penetration and expansion opportunities, especially in underserved regions.
  • The relaxation of investment rules encourages innovation, enabling insurers to develop new products and solutions tailored to changing consumer needs.
  • By creating a more robust life insurance sector, the budget contributes to overall economic stability, creating a favorable environment for long-term investments and financial planning.

Conclusion

The Budget 2024 offers new TDS rates and investment opportunities. These changes are set to transform how insurance providers operate and how policyholders benefit from their policies. As the sector navigates these amendments, it will likely experience increased innovation, greater market competition, and improved customer engagement. While some aspects of existing policies remain the same, the overall impact of the budget is poised to create a more dynamic and favorable environment for both insurers and their clients.

FAQs on Budget Impact on the Insurance Sector

1

How does the budget impact the insurance sector in general?

The Budget 2024 introduces changes that affect the insurance sector by revising tax incentives, updating regulatory requirements, and adjusting investment guidelines. These modifications aim to streamline operations, enhance product offerings, and potentially increase market competition.

2

Are there any new tax benefits for policyholders in this year’s budget?

Yes, the latest budget enhances tax benefits for policyholders by increasing the deductions available on life insurance premiums. This makes life insurance more financially attractive and encourages greater participation.

3

What changes in insurance premiums can we expect from the latest budget?

The budget’s impact on insurance premiums may vary, but policyholders could see adjustments due to new investment guidelines and tax incentives. Premium structures may be revised as insurance providers adapt to the updated regulations and market conditions.

4

How will the budget affect the growth of life insurance policies?

The budget is likely to stimulate growth in life insurance policies by improving tax benefits and introducing more flexible investment options. These changes can attract new policyholders and encourage existing ones to invest more in life insurance products.

5

Are there any new regulations or policies introduced in the budget that affect the insurance sector?

Yes, the budget introduces new regulations that affect the insurance sector, including updated compliance requirements and relaxed investment guidelines. These changes aim to streamline operations for insurance providers and promote innovation in insurance products.

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

Kotak Guaranteed Fortune Builder

Download Brochure

Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.

  • Guaranteed@ Income Benefit for upto 25 years
  • Flexibility to choose income period
  • Premium break for females on child birth or any listed specific illnesses
  • Life cover for the premium payment period
  • Enhance your life cover with rider offerings

ARN. No. KLI/23-24/E-BB/1201

T&C

Download Brochure

Features

  • Increasing Life Cover*
  • Guaranteed^ Maturity Benefits
  • Enhanced Protection Through Riders
  • Tax Benefits
  • Dual Benefits: Guaranteed^Maturity + Death benefits

Ref. No. KLI/22-23/E-BB/999

T&C

Buy Online
Kotak Guaranteed Fortune Builder Kotak Guaranteed Fortune Builder

Kotak Guaranteed Fortune Builder

Guaranteed Income for bright financial future

Invest Now
Kotak Assured Savings Plan Kotak Assured Savings Plan

Kotak Assured Savings Plan

Guaranteed Lumpsum returns for achieving life goals

Invest Now

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.