While this step can attract foreign insurers or investors seeking complete control, the previous FDI growth did not result in adequate capital flow.
The main factor, the CEO noted, the regulator is certainty, which plays an important role in attracting investment – not only in insurance but also in areas. A stable regulatory approach rather than the FDI limit, which actually shapes the investor’s trust and market participation.
Finance Minister Nirmala Sitarman’s budget 2025 increased FDI from 74% to 100% in the insurance sector.
After the announcement, shares of major listed insurance companies such as HDFC Life, SBI Life and ICICI Prudential Life fell to 6%.
The company, whose current market capitalization is ₹ 1,34,464.06 crore, has seen its shares more than 6% increase compared to the previous year.
These are edited parts of the interview.
Question: Since some types of legs will be given, especially on the new structure, the fear is that it may result in less people taking insurance, and may kill your volume in this regard. What do you have to say about this?
A: Points here – The first point is, it is widely available data that about 70% of taxpayers have transferred new taxes to governance. This is the first data point. The second data point is with our own policy holders, our analysis suggests that it is dependent on taxes or tax, there is a reason for them to buy life insurance. So a non-physical number, and even as soon as we go together, it will decrease. Therefore, we have set a long way from tax.
This can certainly be a case a decade ago, but now, in view of innovation in the region and many other products, emphasized more and more security – at least for HDFC life, but even for HDFC life, but even That is also widespread to the sector, the bus is given. The number of those who went to the new tax governance, I do not think it is a disadvantage in any form or size.
Question: You are saying that 80C broadly contributes about 2% of the new personal premium. This is what you are saying?
A: 80C is crowded. There are many things. And if you are salaried, then in all possibilities, when we proclaim an income, we know that even if they have not bought life insurance, their contribution to provident funds, other things, equity linked saving schemes (ELS) and At this time, 80C is consumed or used anyway. So this was not the primary reason, or all reasons, to buy life insurance for them.
Question: This was the redemption of the second change unit link schemes, right? And for a brief period, there was a little fear that perhaps it was being taxed on capital gains, but then it was reported that it was being added to your income tax leveled at a marginal rate. Now, it is being taxed at 12.5%, which is capital against tax. Is this the correct explanation?
A: Yes and much better. So I just intend to decant to some extent in terms of a misunderstanding. First, language – I am only referring to the language mentioned by FM – bringing clarity in income on redemption. So it was to bring clarity and not to present anything new, anything that was quite unfavorable.
Now after February 1, 2021, there was a cap of 2,50,000 and anything above the annual premium was taxed, and it was taxed and tax was levied as capital profit tax. Tax -free up to ₹ 2,50,000.
The policies sold before February 1, 2021, if they follow certain conditions, for example, the number of premium ratio to earn, it was completely tax -free, regardless of the quantum . However, there were some other policies that did not satisfy this several amount and were being taxed at the highest marginal tax rate till date.
Also read HDFC Life Shares since April 2020 Q3 results since the highest increase – Major factor explained
Therefore, the provisions that are now going to make unveiled provisions, is that to simplify it, to say that whatever is not compliant, it will now be taxed under the capital profit tax, instead All the hybrids of the marginal taxes were on the rate and so on.
If you add on it, if you were looking at it – fictionally – if I bought a policy before February 2021 and was assured only six times, it would not be eligible under Section 10D. So I would be paying at the highest marginal tax rate. Therefore, if a taxpayer is paying, or maturity income on 30% tax would have been paid, then it will now be at the capital profit tax rate at 12.5% ​​tax. Therefore, there is a benefit for policy holders who bought their policies before 2021.
Question: The third important announcement from the insurance sector is opening the sector for 100% foreign direct investment (FDI). Will it affect listed players like you? And how does it change competitive mobility, some of which unrestaded players now get 100% FDI and so it becomes very competitive and aggressive?
A: While I welcome 100% in insurance, being practical, even when it went up to 74%, it is not that there was too much money flow. What can be that some foreign insurers or foreign investors may be for which it is 100% or it is zero. It can draw people in this way, or if they do not want complete control and do not want a partner – if their brand appearance as an insured is very strong elsewhere.
But except, will it make a big change in dynamic in competitive intensity? I don’t think so. What is important is some kind of regulator certainty. This is the biggest aspect that will attract flow in any field, and it is one that can be a game changer in terms of certainty on the regulatory approach.
For full interview, watch video together
Catch all the latest updates from the Union Budget here
Catch all the latest updates from income tax here
(Tagstotransite) HDFC Life (T) HDFC Life Insurance Company (T) Union Budget (T) ELSS (T) FDI
