It is said that if the tax regime gets stable. Then it will surely aid the country by offering greater clarity and comfort to businesses and retail investors. Life insurance and long-term capital gains on listed equities are the two areas in the financial savings segments. Which will be grateful to the government if they stabilize the tax regime.
However, if we focus on the role of life insurance in channelizing truly long-term funds then it is unparallel. In a country like India, where the market highly prices sensitive. Pricing is critical for broadening the penetration in the market. Ideally, many insurance companies have enjoyed a preferential tax rate of 12.5% under Section 115JB of the Income Tax Act. It is observed that the expectation of implementation. The Direct tax Code has created an uncertainty in the market on the potential impact on insurance companies. Implementation of the Direct tax Code may also help in bringing in an overall simplified tax structure and rates.
Apart from this sector or area, there is one other area. That needs similar clarity and that is long-term capital gains on listed equities. It cannot be denied that the positive investor sentiment for the capital markets. In turn, helps channelize more savings to equity. Which facilitates bringing in domestic capital for the private sector as well as dis-investments by the Government.
In this context, it’s expected that through the Budget 2018. The government will continue to aid the virtuous cycle in such areas.