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Finance Minister P Chidambaram presented the Union Budget for 2008-09 in the Lok Sabha on Friday.
Has he made life easier for those in the insurance sector? Will it boost growth of the insurance sector?
Post-Budget, should you invest more in the insurance sector?
Gaurang Shah, MD, Kotak Mahindra Old Mutual Life Insurance Limited, replied to many such readers' queries during a live chat on rediff.com on Friday. Here is the transcript:
Gaurang Shah says, I welcome all readers on this Chat Session and will try and provide insights on the Budget.
RAJ asked, IS THE FDI LIMIT STAYS @ 26%, NO MENTION OF IT GETTING HIKED TO 49%????
Gaurang Shah answers, at 2008-02-29 15:55:15Yes, It stays at the same level of 26%. Since 2004 announcement it has been stalled and likely to change only after the next election as left parties are not in favour of it. At this stage however, most of the Insurance copmanies promotor companies are well capitalised and they can support the expansion.
sDAAS asked, Dr. Manmohan says its a budget for "common man" what benefits a common man directly sees into it ?
Gaurang Shah answers, Reduction ot tax. For 5lac earner the tax is down by 44%. For a 3 lac earner it is 62%. Atleast 4000 Rs of tax gain for every one. No new taxes. Reduction isn overall excise duty by Rs 5000 Cr.Less inflationary proposal and targetted growth rate of about 8-8.5% will benefit the common man
arvind asked, what u say about this bug what + you think for investors in market and commodities
Gaurang Shah answers, The budget overall is a good one as it continues on the track which has given us a good dividend. The economy is robust and the tax collection has been very good leading to fiscal deficit of 3.1%.Further reduction to 2.5% for the next year and excise reduction will be less inflationary paving the way for reduction in interest if the global commodity boom slows down particularly crude prices. The disappointment from market perspective was that the expectation of reduction of corporate tax has not happened and ST capital gains have incresed to 15%. The Individual tax reduction has been very good upto 7 lacs of earning which should create the feel good.Commodities are not affected either side as it is more a global phenomenon and if the developed world slows down it is bound to cool off. For agri commodities the woes may contiue due to the global shortage.
meinvestor asked, For investors in ULIPs how is the increase in Short Term capital gains going to affect us?
Gaurang Shah answers, It does not affect at all as the maturity benefit or the death benefit from ULIP is tax free under Sec 10 (10) d of the IT act.
Parimal asked, IS ULIP Policy holders will get afffected by this budget?
Gaurang Shah answers, The levy of service tax on the Fund management charge may affect them if the Insurer passes on the increse. In that case the FMC will go up by 12.36% on the average charge ranging from 1-1.5%.
fido asked, Mr.Shah, the response to you here is thanda, I think they should have asked Mallika Sherawat to come and chat about the budget instead :)
Gaurang Shah answers, Budget in fact is losing its charm over the years. It is even better if she makes the budget speech.
niting asked, Sir, Is any provision for SEZ is changed in the budget ?
Gaurang Shah answers, DOes n't look like. But you can make those changes even outside budget. In coalition governmant it is sometimes more prudent to keep it outside such hyped up event.
MaheshLN asked, Since IT Sector-Packaged Software has been taxed,do you feel IT Employees will have tough time?
Gaurang Shah answers, Not really. It will be borne by the consumer. The hardship may come from Rupee appreciation more compared to any such changes. In the medium term it is our best internationally recognised indutry and it will always have a great future.
ngupta4u asked, kindly inform what steps the FM taken to boost India Infrastructure ?
Gaurang Shah answers, There is nothing direct which I noticed except our commitment of new power plants under the 5 yr plans.However it is a major ongoing story and will continue to have focus. On a Social Infrastructure side there has been major announcement on education, healtcare and agriculture. More important that the government recognises that the 'demography dividend' will be earned only if we have the skilled and healthy demography.
vk asked, I have not seen tax holiday for IT Sector in this budget.is it in the proposal or not
Gaurang Shah answers, Currently it looks like the original proposal to withdraw the exeption continues.
AmitParekh asked, Good Afternoon Sir, though budget was not seen as major cue for the markets to respond to, do you see any movements in stock markets based on the budgetory changes
Gaurang Shah answers, Once the dust settles down the reaction will ne neutral to positive. Our market currently gets affected by more global cues and slowdown in FII investments. Ultimately the global liquidity will chase good underlying performance. If we continue on 8-8% GDP trajectory we should be fine. The budget has tried in its own way to give some tax concession to increase consumption. By reducing deficits paved the way for pre empting less financial rtesources from money market.Dis- inflalionary policies should lead to more conducive environment to reduce interest which we need to support both consumption and investment.
akhilsharma asked, What positive impact do you see in the growth of insurance industry with the current reforms. In %age terms how much growth do u expect given the current budget
Gaurang Shah answers, Increase of 15000 Rs in the Sec 80( d) limit which covers health insurance premium is positive. Even the increse in basic exeption limit as it gives more money in the hands of individual to save. Life Insurance indutry is growing very fast with growth of about 34% in New Business premium so far this year and in my view should grow at about 25% pa for next five years.
rajkulkarni asked, Good afternoon shah,Can you tell me how much banking sector affect with this morever about stocks of banks
Gaurang Shah answers, The most significant provision has been the debt write off of 60000 Cr. We will get some more clarity by tomorrow on how it is going to get funded. How much of this has already been provided in the books of the bank? It surely affects the basic credit compliance culture as we pay tax on compliant behaviour. Which is damaging in the long run.
Raja asked, Sir can u give me the expression for calculating GDP or on what factors do the GDP depend
Gaurang Shah answers, GDP is dependant upon the Investment ( 36%) divide by ICOR (4%)( Incremental Capital Output ratio). It gives us the rate of 9% growth.Investment is dependant upon savings rate. , which has gone up over last 5 years. The three constituents are Services ( 56%) growing at 10%, Industry ( 26%) growing at 9% and agricuture ( 18%) growing at 2.5% gives us weighted average rate of 8.7%. To keep the social balance as 60% population depends on agriculture and to beest overall growth there is so much focus on Investment in the agri sector.
tiwari.ravikant asked, What is maximum limit of investment for deduction Under section 80c/80CCC, ravi
Gaurang Shah answers, Rs 100000/_
suno asked, according to new tax slab which 1 is good for getting tax rebate MFs of Insurance..?
Gaurang Shah answers, Invest short term money in ELSS scheme of MF ( others are not covered)and long term money - over 5 years in ULIP. Both are deductible under overall limit of 1 lac U/ Sec 80 (C)
raviamb asked, sir what abt it sector is theire any relief?
Gaurang Shah answers, No, Does n't look like.
shah asked, No increase in 80C limit for investment in insurance. Any regret for this ?
Gaurang Shah answers, Not really as the basic exemption limit has moved up by 40000 and the tax slab has also moves up. It gives individulal more money to consume and save. It serves the same purpose in indirect way. In a given year the FM can do limited things.
Suhas asked, Gaurang, I heard upto 15k parents insurance is allowed? What is detail news?
Gaurang Shah answers, Yes, I have heard the same. The details will be confirmed by tomorrows fine print
ankit asked, HOW LONG WILL THESE SAME TAX SLAB REMAIN
Gaurang Shah answers, Anyones guess. It will never move up for sure.
vinayga asked, hello, Is there any bebefit for POST saving Account? thankx, Vinay
Gaurang Shah answers, It is covered U/Sec 80 (C). Nothing chages.
PC asked, Is there any benigit for 9Lac salary?
Gaurang Shah answers, Your tax liability reduces by about 45000/- Invest with us.
Vishal asked, hi gaurangbhai, what do you think are the obstacles which india faces as it tries to continue on its existing devleopment path, it has got all the resources needed to develop into a superpower but what is the realistic timeframe for india to achieve the same.
Gaurang Shah answers, The will to execute. by 2027 we should be the 3 rd largest economy if we grow at the rate of 7% pa.
Aditya asked, ULIP plans are coming under service tax net,will it affect the charges of your ULIP plans
Gaurang Shah answers, Thank you for chatting and Goodbye.
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