Budget 2023: What insurance and fintech industry can expect from FM Sitharaman?

   2023-01-21 17:01

Insurance sector expectations from Budget FY2024

Mr. Ankit Agrawal, CEO and Founder InsuranceDekho said “With the upcoming Budget, we are expecting the implementation of reforms that will boost the Indian insurance sector. We expect the government to ease the minimum capital requirement of 100 crore making it easy for companies to start an insurance business. We are also anticipating the implementation of a composite license regime, which will facilitate insurance companies to sell general and life insurance products through one license. This move will fuel competition and better utilization of the distribution network, contributing to the insurance sector’s growth.”

“On the customer front, the tax deduction limit under section 80D ( 75,000) and section 80C ( 1,50,000) can be increased to increase insurance demand and improve penetration. The current 18% GST on insurance premiums makes a policy expensive and less accessible to common people. The government should reduce the GST to 5% or nullify it. This reduction will make insurance policies affordable and accessible. Likewise, on the agent front, the TDS exemption limit on the insurance commission can be increased from 15,000. Lastly, passing and implementing the Insurance Laws (Amendment) Bill 2022 will also be a welcome move for the sector.,” further added Mr. Ankit Agrawal.



Yogesh Agarwal, Founder and CEO, Onsurity said “The Insurance Regulator along with the government has taken some significant steps over the last year with a view to enhance insurance penetration across the country. In the upcoming Budget, the government should look at offering GST credit to small and medium-sized businesses that sponsor the cost of insurance and wellness for their employees. This will further boost and motivate SME employers to provide adequate healthcare to their employees and in turn, reduce the burden on the government to provide the necessary healthcare to the country’s missing middle. Health and wellness have direct impact on productivity and loyalty which in turn influences the country’s GDP. Additionally, the government should also review the skyrocketing medical inflation and its impact on low-income households due to high out-of-pocket expenses.”

“Composite license is another aspect that the government should push for because this will benefit the industry as well as policyholders alike. It will give insurers the necessary economies of scale and customers the option to buy multiple products from the same insurer, in turn lowering the cost of distribution (40% – 50% of premium) which is one of the major costs of operating an insurance business. For policyholders, this will reduce the burden of excessive documentation and remembering renewal timelines,” further added Yogesh Agarwal.

“From the insurance perspective there are many expectations from the upcoming budget. A large number of other financial products, such as public provident fund (PPF), equity linked savings scheme (ELSS) and insurance, take up most of the 80C limit. A separate section should be dedicated to insurance, particularly term insurance. If we need to further improve the penetration of life insurance in India, there should be some push towards term insurance plans. Even the limit of 80C has not been increased for many years now, it would be great if the limit s hiked to 2.5 lakh per annum. Coming to non-life insurance, the limit for health insurance is 25,000 which I feel is slightly lower, it would be great if that can be increased to 50,000. Currently, annuities are taxed in the hand of investors, which results into lower returns. There can be huge relief to the investors, if the annuities are tax exempted,” said Rakesh Goyal Director of Probus Insurance broker.

Fintech sector expectations from Budget FY2024

Mr. Mandar Agashe, Founder MD & VC of Sarvatra Technologies said “There have been several incentive schemes announced by the Government in the last few Budgets which has helped promote digital payments, especially the Unified Payments Interface (UPI) based payments. This in line with the Government’s ‘Digital India’ initiative aimed at financial inclusion. We are expecting the momentum to continue in the upcoming Budget. Serving the unserved and underserved is the mission that should continue with UPI 2.0’s recent products, such as UPI 123 and UPI Lite, the two most crucial products that will help penetrate the semi-urban and rural regions of India because of easy accessibility it offers to those who can’t afford smartphones but are using feature phones and want to transact digitally. At gram panchayat level or at the village level, Self-Help Groups (SHGs) can also promote the usage of offline payments through UPI. This will help the UPI to grow really fast. When SHGs start using the offline mode of payment through UPI, the confidence of the general public will start building up. If such SHGs are provided with incentives for doing digital payments, that will be a huge game changer for the last-mile village.”

“The Government may consider enhancing the payments acceptance infrastructure in the underserved regions of the country. This can be done by providing an impetus to Aadhaar Enabled Payment System (AePS) terminals, which will take payments to pockets where customers may not have a smart phone and debit cards as yet. The upcoming Budget should also focus on expanding digital payments footprint across the world. We laud the recent initiative of NPCI to extend UPI payment facility to NRIs using their international mobile numbers. Currently, NRIs residing in 10 countries, including Singapore, Australia, Canada and the United Kingdom, will be able to avail this facility. We are hopeful that by the end of this year, almost all countries with good NRI populations will join UPI. The Union Budget 2023-24 can accelerate the pace of UPI going global as well as making it interoperable with global payment networks. Initiatives to take BBPS platform to other nations may also be considered,” said Mr. Mandar Agashe.

Kumar Shekhar, Deputy Country Manager, Tide India said “Today, the Indian fintech market is predicted to reach $200 billion by 2030, outpacing the rest of the world in adopting fintech. Marking the immense growth potential of the industry that is unlocking the doors for financial inclusion across India; the government has also shifted its focus towards the game-changing industry-Fintech. The RBI interventions made in the Indian fintech ecosystem to maintain a necessary balance between innovation and security have helped India emerge as one of the most favourable markets for several fintech organisations.”

“On the same lines, we expect the honourable finance minister to unravel the budget 2023 with business-friendly tax policies encouraging smaller fintech businesses/startups by providing exemptions in GST till a certain limit on revenue. This will eventually reduce the burden of tax, and challenges that the startups face at the nascent stage. Also, to holistically boost the development and growth of the fintech and financial industry in the country, we look forward to the central authority’s support in bringing amendments that create a push for fintech incubation centres across the country that would subsidise basic amenities such as internet and office space rent or providing them with a credit line to help them avail of collateral-free loans with the first year being interest-free, etc. This will further help in creating effective, robust technological infrastructure striving to contribute towards nation building,” said Kumar Shekhar.

“India is working rigorously to increase financial inclusion and digitise its population quickly across the country, including tier 2, 3, and 4 cities. The current fintech ecosystem is committed to the same, and primarily they are leveraging UPI to facilitate this. We look forward to the government’s clear guidance on how the cost which the current financial services industry is bearing on account of UPI services can be compensated. To further strengthen the fintech ecosystem in India, new guidelines compensating the UPI transactional cost for the fintech industry will be a significant development providing impetus to the entire industry’s growth. Though there has been a considerable adoption of UPI, it still has a long way to go for universal adoption, and the structure revision should be decided keeping that in mind,” further added Kumar Shekhar.

Monish Anand , CEO & Founder, MyShubhLife said “Fintech’s can certainly do with tax reliefs in the upcoming budget. We are hoping for reduction in startup taxes perhaps with no GST until a certain scale of business is achieved. While ensuring the right degree of regulation, relaxation of tax norms to some extent will allow the fintech industry to increase their reach and operate more effectively to provide seamless credit to borrowers. As far as the FLDG (First Loan Default Guarantee) model is concerned, there needs to be more clarity on that. We would like for the government to reconsider and look at a reasonable cap to the FLDG models. The government also needs to broaden the criteria for tax relief to start-up employees to reduce the burden on taxation of ESOP sales. Overall the Fintech Industry could do with more assistance from the government on liberalization of both direct tax and GST rates.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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