Budget 2025 Expectations | Govt should introduce a holistic tax regime, says Manoj Purohit, Partner & Leader, FS Tax, Tax & Regulatory Services, BDO India

Finance Minister Nirmala Sitharaman will present the 8th consecutive Union Budget on February 1, 2025. Reports suggest that the government is mulling over cutting income tax for those who are earning up to Rs 15 lakh a year in February's budget, in turn providing relief to the middle class.

The insurance sector has pinned high hopes on the Union Budget FY 2025-26 documents and is keeping its fingers crossed regarding their expectations from the government's most important financial document of the year.

Here's what Manoj Purohit, Partner & Leader, FS Tax, Tax & Regulatory Services, BDO India has to say--

The insurance sector, in particular, is closely watching this budget, not only for the potential regularisation of tax provisions but also for the rationalisation of certain regulatory changes. With the implementation of IndAS 117 on insurance contracts, insurers will be required to enhance the transparency of their financial statements and performance.

This new framework will bring challenges related to the application of the current value approach for measuring insurance contracts, which could impact the estimation of future cash flows, unearned profits spread over the term of contracts, and risk management practices associated with each insurance policy.

As these elements are reflected in insurers’ financial statements, they would also have a direct impact on the taxation as life insurance companies, which are taxed based on on the surplus determined by actuaries. To address these challenges, the Budget 2025 should introduce a holistic tax regime that aligns with these new financial reporting standards.

As the insurance sector continues to innovate with new products, meets customer expectations, and adopts more sophisticated risk management practices, it is essential that policymakers create a robust, conducive environment for the industry.

This will help safeguard the interest of policyholders and empower insurers to scale-up their operations, extending their reach to even the most underserved segments of the population.

Union Budget 2025 | Nirmala Sitharaman, who continues to be Finance Minister, will present her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', reports suggest there might be a tax relief for those making up to Rs 15 lakh per year. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.