Skip to main content

Stock Market News - Budget 2020 | Removal of exemptions in new tex regime to impact life insurers, MFs

A salaried professional opting for a lower rate of tax under the new regime will not be eligible for deductions, including insurance premium paid and ELSS investments.

Removal of tax exemptions under Section 80C in the new tax regime could be a dampener for life insurance products as well as equity-linked savings schemes (ELSS) of mutual funds.
In her Budget speech on February 1, Finance Minister Nirmala Sitharaman said a salaried professional opting for a lower tax rate under the new regime will not be eligible for deductions, including insurance premium paid and ELSS investments.
“The removal of 80C benefit may pose a risk to new business volumes of life insurance companies,” said Kotak Institutional Equities in a report.
Life insurance

Tax exemptions are an important incentive for purchase of life insurance. To be eligible for exemption under Section 80C, the sum assured has to be 10 times the annual premium. This is part of the Rs 1.5 lakh limit under this section.

But now, those who opt for the new tax regime will not be eligible to claim any deduction under Section 80C.
It is likely that those earning annual income between Rs 5 lakh to 7.5 lakh could switch to the new regime and hence will not have any incentive to buy an insurance product.
Though tax saving is not the only objective to buy life insurance, it is one of the motivators. Life insurers are hopeful that fewer people opt for the new regime.
Kamlesh Rao, CEO Aditya Birla Sun Life Insurance, said the insurance industry will be watchful of the implication of direct tax changes in the new tax regime.
As soon as the new regime was announced on February 1, life insurers' stocks were hit. Currently, HDFC Life InsuranceICICI Prudential Life Insurance and SBI Life are listed on the stock market.

Shares of Max Financial, which holds Max Life, gained 8.65 percent intraday today (against a 12.8 percent fall on Budget day), ICICI Prudential rose 1.69 percent (against correction of 10.93 percent), HDFC Life gained 1.80 percent (against a fall of 6 percent) and SBI Life was up 3.12 percent (against a decline of 10 percent).
The high reliance on the fourth quarter for premium collection by life insurers has, however, come down. Since Q4 is when individuals buy life insurance to claim deductions, a major portion of the new premiums would come in the January to March period.
The Kotak report said the overall business booked by insurance companies in Q4 was down to around 35 percent in FY19 from more than 50 percent in FY05.
Mutual funds

On the mutual funds front, fund officials said that the ones who opt for the old regime will receive the ELSS exemption.
In the past few years, mutual funds have witnessed robust inflows in ELSS schemes considering that there is a lock-in of three years as against five years in life insurance.
The assets under management of ELSS schemes stood at Rs 99,817 crore in December 2019 as against Rs 88,512 crore a year ago and Rs 80,891 crore in December 2017.
"If a large set of individuals opt for the new regime, then they will not go for schemes like ELSS as there is no exemption in the new regime,” said Jimmy Patel, CEO of Quantum Mutual Fund.
Concurring Patel's view, Uday Ved, Tax Partner, KNAV said, “We believe more millennials may opt for the new regime to avoid the investment hassles as some of their investment burden is already borne by their parents. To that extent, life insurance and ELSS schemes may take a hit. Also, the new regime would not create more tax liability compared to the existing scheme.”

Disclaimer: The views and investment tips expressed by investment experts on are their own and not those of the website or its management. advises users to check with certified experts before taking any investment decisions.


  1. This is really an amazing one as lot of tips to pic. Great informations. Thanks for sharing.
    Stocks in News
    Rossari Biotech IPO

  2. nice information thanks for sharing valuable content with us we also provide great information related to your blog feel free to visit our Forex market

  3. This is such a helpful description of and guide to, identifying and getting to know more. And also need to figure out some topics related to share market.
    HDFC institutional equity
    Edelweiss Securities
    Axis Bank
    Kotak Institutional Equities

  4. Looking for Stock Market Training for Beginners? Traders Gurukul offers Best Share Market Classes, Stock Market, Online Trading & Technical Analysis Courses.

  5. Nice information on your website and it really helped me. Now, I will regularly read your blogs. Thumbs up .

    Stock Trading Tips


Post a comment

Popular posts from this blog

Stock Market News - Nestle Falls, Lupin gains, Laurus Labs Swings

Nestle Falls After Quarterly Results Announcement Shares of Nestle India fell as much as 1.5 percent to Rs 14,260 after the company announced September quarter results.

NEWS ALERT | Infosys looking to beef up whistleblower investigation: Report -- Infosys rules out insider trading
-- Co in talks with law firms JSA Law, Khaitan & Co for investigation
-- Appointment of one or both of the above-mentioned companies, in addition to Shardul Amarchand Mangaldas already appointed
NTPC, YES Bank and Tata Motors are the top gainers while Sun Pharma, Infosys, and IndusInd Bank are the top losers. The most active stocks included Reliance Infra, Bank of Baroda and YES Bank.
Rupee Update: The Indian rupee opened lower by 8 paise at 71.36 per dollar on Monday versus Friday's close 71.28.
Lupin share price gains on USFDA approval - The share price of Lupin gained over 1 percent in early trade on November 11 after the company received United States Food and Drug Adminis…

Stock Market News - Telecom Operators Decline, Aurobindo Pharma extended decline

Telecom Operators Decline; Vodafone Idea Slumps 14% Shares of the telecom operators declined. That comes after the Department of Telecommunications has issued a notice to telecom operators to pay their revenue share dues within three months as directed by the Supreme Court, PTI reported quoting an industry source. 
As per DoT's estimate, the liability of Bharti Airtel Group is Rs 62,187.73 crore, Vodafone Idea Rs 54,183.9 crore and BSNL and MTNL Rs 10,675.18 crore, the report added.
Aurobindo Pharma At Over Five-Year Low Shares of Aurobindo Pharma extended declines for the fourth consecutive trading session. The stock fell as much a 9.1 percent, the most in over a month to Rs 394.30, the lowest since September 2014. 

The comes after the pharmaceutical company said that the U.S. FDA issued Form 483 with 14 observations after completion of an inspection of Unit IV of the drugmaker’s Hyderabad facility. Form 483 is used by the FDA to document and communicate concerns discovered during…

Stock Market News - Vodafone Idea falls, Lupin Gains, Power Grid Gains

Vodafone Idea falls 8% Shares of Vodafone Idea fell as much as 7.5 percent to Rs 3.70. Vodafone Group Plc’s Indian venture may be headed for liquidation unless the government eases off on demands for mobile spectrum fees, Bloomberg reported quoting the company’s Chief Executive Officer Nick Read.

Lupin Gains After Offloading Japanese Business Shares of Lupin rose as much as 3.1 percent to Rs 758.80. India’s fourth-largest drugmaker by market value informed the exchanges it has entered into a definitive agreement to sell 99.82 percent of its stake in Kyowa Pharmaceutical Industry Co. to Plutus Ltd., a subsidiary of the private equity firm Unison Capital Partners, at an enterprise value of 57,361 million Japanese yen—nearly Rs 3,702.4 crore. 
That, Lupin said, would generate a post-tax net cash inflow of Rs 2,103.9 crore.
Power Grid Gains After large Trade Shares of Power Grid rose as much as 1.4 percent to Rs 194.35. About 16.6 lakh shares of the company changed hands in a large trade, B…