India markets close in 1 hour 15 minutes

Budget 2020: Job creation, tax sops high on millennials’ wish list for Nirmala Sitharaman

Priyadarshini Maji
budget 2020, budget 2020 expectations, budget 2020 income tax expectations

Union Budget 2020: As home to the world's largest group of young, employable population, in India, several young people join the workforce every year. Hence, there is an urgent need to create ample jobs for those skilled in labour, and India aspires to add over 100 million secondary educated people to its workforce by 2030.

Job creation

Keeping this in view, the government should focus on job creation. Rahul Jain, Head, Edelweiss Personal Wealth Advisory, says, "Most of those entering the corporate sector would be millennials. Thus, emphasis must be given not only to suitable job creation but also to the creation of financial opportunity." This means millennials need to be empowered to meet their financial goals. Jain adds, "The Budget must ensure that adequate measures are introduced to boost the growth of startups and MSMEs, as they significantly contribute to the job creation in the economy, along with ensuring the financial stability of the next generation set to enter the workforce."


The insurance sector plays a critical role in an economy by securing future earnings of individuals and companies and enabling a balanced risk transfer, thereby protecting the GDP of a country. However, in India, this vital role and extent of insurance are both underserved and underachieved.

According to the Insurance Regulatory and Development Authority of India (IRDAI), the protection gap difference between insured losses and economic losses in the country is between 70-80 per cent and the overall insurance penetration is at 3.7 per cent of the GDP. A recent report by Lloyd's of London estimated that India has the second-largest insurance gap in the world of $27 billion after China which has an insurance gap of over $76 billion.

Vineet Arora, MD and CEO, Aegon Life Insurance says, "Given this huge protection gap and its potential impact on the nation, we would like to see the government incentivising purchase of Term Plans ('Risk of living too short') and Annuities (Risk of 'Living too long') further in the forthcoming Budget."

Tax changes

The budget could bring in changes to corporate tax and income tax slabs, which would be suitable for millennials who aspire to experience their life to the fullest, while still young. Jain of Edelweiss Wealth says "Simplification of tax compliance could translate into better cash flows for startups, ensuring sustainable growth both for them and their employees."

Hiking tax exemption on Term Plans

At present, the maximum tax exemption, provided under Section 80C of the Income Tax Act, is Rs 1.5 lakh. Arora of Aegon Life Insurance says, "Since term plans are priced efficiently and economically, providing more incentives-such as a separate rebate of Rs 25,000 to buy Term Plans-would certainly induce many of the under-insured to secure themselves." Such a step would be helpful for the younger population who are joining the national workforce to cost-effectively avail a life insurance plan.

Cut in Stamp Duty on Term Plans

Simultaneously, the burden of buying a Term Plan must be lessened by reducing the Stamp Duty on the same.

Tax-free annuities

As per current tax implications, only one-third of the corpus that is distributed to the retiree (after reaching the retirement age) by the pension plan is tax-free. The rest, distributed as an annuity, is subject to taxation depending on the retiree's tax rate at the time of retirement. Thus, annuities are taxed in such a way that the principal amount also gets taxed.

Arora of Aegon Life Insurance says, "Given the overall economic volatility and its impact on retirement savings, the government must use this Budget as an opportunity to encourage financially sound retirement plans by making all annuities (upon maturity of a policy or pension fund) tax-free."

The industry believes that solving this anomaly would encourage citizens to buy annuities as the most reliable step towards retirement.

Watch | What is Union Budget of India?