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Help People Plan Their Finances Better

We hope for a separate exemption limit for insurance premiums

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For the common person, financial concerns can be broken down to “How much can I save?”, “Where can I save?”, and “How easily can I save?”. No wonder the annual budget is one of the most closely followed financial events of the year for it gives a hint to where the answers to these questions lie. Here are some of the resolutions we look forward to in this budget.

For many, saving begins and ends with taxation in mind. Currently, the maximum tax exemption via Section 80C of the Income Tax Act is Rs 1.5 lakh. This includes investments in insurance premiums, PPF and EPF contributions, ELSS investments, ULIPs, NSCs and more — essentially contributions towards protection and investment products. One of our asks from this budget is for a separate exemption limit for premiums paid towards term insurance. People have a tendency to look at investments and protection exclusively from a tax perspective. Very often, funds are split across the different 80C categories between investments and insurance premiums with very little planning. Today, people are beginning to realise the significance of insurance products and an increasing number of people are looking to secure themselves and their families. Similar to investments, there is no one standard type of insurance for all occasions. You need different covers at different life stages. So, being adequately covered requires careful planning.

Having a separate category for insurance premiums would mean that people focus more on the kind and type of insurance covers they opt for instead of purchasing for tax reasons. One good example here, is the way having a separate Rs 50,000 exemption for NPS investments under Section 80CCD(1) made people consider retirement planning in a different light. The total assets under management at NPS and APY as of 31 October was Rs 2.1 trillion, up by around 21 per cent from Rs 1.7 trillion in March 2017, highlighting how a separate category under section 80C can influence better financial planning. Doing something similar for insurance can make the average person plan their insurance portfolio better.

Another Indian middle class dream is to own a home. To facilitate this dream, the government has interest rate subsidies on home loans for the middle income households. For example, households earning between Rs 6 and 12 lakh a year can claim a 4 per cent subsidy on home loan amounts up to Rs 9 lakh. Households earning between Rs 12 and 18 lakh annually can receive 3 per cent on loans up to Rs 12 lakh. However, if you consider the property rates in urban India, the loan amount is much lower than the prevalent property prices. We believe these caps should be raised so that they’re in tune with the growing costs of property ownership in urban areas.

Today, if you opt for eKYC to invest in mutual funds, you can invest only Rs 50,000 per fund house per year. To increase this limit, you will have to get in-person verification done or complete biometric-based authentication. I hope this budget increases the monetary limit for paperless e-KYC via OTP, which will take away the need for submitting physical copies of the PAN or Passport.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Union Budget 2018 magazine 3 february 2018 opinion

Adhil Shetty

The author is CEO & Co-founder, Bankbazaar.com

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