LIC may get a big shock due to new income tax option of government Know what will happen to your policy

The new income tax option in the budget may shock the country’s largest and only government insurance company Life Insurance Corporation of India (LIC). In fact, the new income tax option is expected to affect the income of LIC due to the abolition of the traditional tax incentive to taxpayers on insurance. According to media reports, the valuation of LIC can also be reduced by this decision. Business newspaper Economic Times of EnglishIt has been reported in the news that there is pressure on the valuation of insurance companies because these companies are trying to change their plans according to the government’s proposed direct tax system. According to a report by global brokerage firm Jefferies, LIC’s retail business is part of a participatory policy that provides middle and low income families with the aim of tax planning. Therefore, the biggest impact of reducing tax benefit will be on LIC.

Understand the new income tax option…

PC Modi, chairman of the Central Board of Direct Taxes (CBDT), told CNBC Awaaz in a special conversation that taxpayers will have both options for low-income and non-income tax income Choose a new system. Or stay in the old system. Where there is a tax exemption on saving.

In the new tax system, there will be an option to pay tax at a lower rate, but it will not get any benefit of deduction. For which option will be beneficial for taxpayers, they will have to calculate their tax liability under the new and old tax option.

All the deductions found under Chapter 6A of the Income Tax Act like Sections 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80 -IAC, 80-IB, 80-IBA, etc. You will not be able to take advantage of the new tax option.

How will this affect LIC –  Experts say that LIC has a retail business participatory policy that provides middle and low income families with the aim of tax planning. Therefore, the biggest impact of reducing tax benefit will be on LIC. That is why there was a huge decline in the shares of insurance companies on the budget day. ICICI Prudential shares fell 12.6% and HDFC Life shares fell 5.8%, while SBI Life shares also slipped 8.6%.

On the other hand, it is also believed that the new tax option will not significantly affect the growth of the insurance company, because the new generation did not show interest in the savings products of LIC or other insurance companies and only took a term plan. If there is no tax benefit, they may want to keep more cash in their hands for consumption.

Also read- If you have more than one bank account, then know how many lakh rupees will be safe now?

Valuation of LIC may be reduced – According to the environment created in the market before the budget, the valuation  of LIC was estimated to be Rs 8-10 lakh crore. At the same time, if the government sells 10 percent stake, it can get more than Rs 80,000 crore. This will help him achieve a major share of the disinvestment target of Rs 2.1 lakh crore fixed for FY21.

What will be the effect on the policy makers- Currently, three-fourths of India’s insurance market has a hold over LIC. However, last year itself, some wrong decisions of LIC regarding investment were also questioned. Now with the government’s decision to bring LIC IPO, it is believed that after the listing of LIC, there will be more transparency in the functioning of the company.

If the company performs better then the insurance holders will also get its benefit. Experts say that most of the policies of LIC are non-unit link. This means that if there is any fluctuation in the stock market, then the effect will not be seen on the policy. At the same time, the effect of better performance of the company will be seen positively on the investment of the people.