MF industry to get more investors: Since the government has proposed to allow interchangeability of PAN and Aadhaar, investors investing in mutual funds and insurance will either have to submit their PAN card or Aadhaar to invest in mutual funds. Experts believe that the move will ease KYC process and bring more investors to the mutual fund fold. Currently, nearly 120 crore Indians have Aadhaar card.
Enhanced deduction for health insurance policies: The deduction limit for medical insurance was increased from Rs. 15,000 to Rs. 25,000. For senior citizens, such a deduction was increased from Rs. 20,000 to Rs. 50,000 and for individuals with disability, it will be Rs. 25,000 now. In addition, deduction on treatment of senior citizens suffering with critical illnesses was increased from Rs. 60,000 to Rs. 1 lakh.
GST on third party insurance premium reduced: GST on third party insurance premium will be reduced to 12% from 18%.
Equity ETFs may get tax benefits: ETFs that track CPSE stocks may get tax benefits like ELSS. This means, investors investing in such ETFs will get tax deduction of up to Rs.1.50 lakh under section 80C.
The finance minister said, “ETFs have proved to be an important investment opportunity for retail investors and has turned out to be a good instrument for Government of India’s divestment programme. To expand this further, Government will offer an investment option in ETFs on the lines of Equity Linked Savings Scheme (ELSS). This would also encourage long term investment in CPSEs.”
Gold may not glitter: The government has proposed to increase custom duty on gold from 10% to 12.5%.
AIFs to become attractive: There will be no tax scrutiny in AIF category I and AIF category II. This means, the tax authority would not question the rationale for arriving at a particular valuation of security in which deal is done. Experts believe that though this is not a significant development, this will be a relief for AIF players.
Setting off against losses allowed in AIFs: Currently, setting off against the losses in AIFs Category I and II is not allowed. With this, investors will be able to set off their losses against the gains they made on such investments, which would decline their tax outgo.
100% FDI in insurance intermediary: Allowing 100% FDI in insurance intermediaries may bring technology and innovations in the financial distribution space. The move will also help bring an international exposure to the domestic market. Since insurance brokers represent interest of policyholder, a 100% FDI in this space may benefits investors with world class service. Also, it will lead to increase in competition among intermediaries which will benefit investors.
NPS become more attractive: It is proposed to allow deduction for employer’s contribution upto 14% of salary from current 10 for central government employee. Also, Tier II NPS account of central government employee will fall under 80C.
Also, in a wider interest of NPS subscribers, the government would segregate NPS trust from PFRDA.
More global re-insurers to get operational in India: In order to attract foreign players, the government has proposed to reduce requirement of maintaining net owned for on shore insurance transaction business and re-insurers operating in IFSC from Rs.5000 crore to Rs.1000 crore. This essentially means that net worth requirement to start operations in India will be reduced.
Individuals with home loans will have more money to invest: Government has proposed to increase tax deduction benefits on home loans from Rs.2 lakh to Rs.3.50 lakh. This means, such individuals falling under 30% bracket could save Rs.45,000 per year on taxes.
Also, deduction of Rs. 50,000 was provided on interest income from deposits for senior citizens.
More mutual funds to open shops in IFSCs: In order to facilitate setting up of mutual funds in the IFSC, there would be no additional tax on distribution of any amount on or after September 1, 2019, by a specified mutual fund out of its income derived from transactions made on a recognised stock exchange located in any IFSC.
Increasing minimum public shareholding: The government has asked the SEBI to consider raising the minimum public shareholding in the listed companies to 35% from 25%.
If this comes into force, then promoters who have more than 65% stake in the company must bring their holding below it. Currently, of the top 500 Indian companies, there are nearly 100 companies where the promoter holds more than 65% stake.
Creating a Social Stock Exchange: The government has proposed to create an electronic fund raising platform called social stock exchange. This will be used for listing social enterprises and voluntary organizations working for the realization of a social welfare objective, so that they can raise capital as equity, debt or as units like a mutual fund.
Experts said that impact of this is difficult to assess, as such proposals take a lot of time to implement.
Proposal to allow AA rated bonds as collaterals: The government has proposed to allow institution to raise loan against AA rated securities. So far, corporates were allowed to raise loan against their AAA rated securities.
