Page 14 - Insurance Times March 2023

comparison to 32 per cent recorded in
Advantage Mutual Funds after tax blow on MLDs,
2017. As on date, total assets under
management (AUM) in APY is also insurance
more than Rs 25,000 crore, it said. The Rs 40-trillion mutual fund (MF) industry is expected to benefit from
stripping tax advantages off high-ticket insurance products and market-linked
Under the scheme, a subscriber would
debentures (MLDs) in the latest Budget.
receive a minimum guaranteed
pension of Rs 1,000 to Rs 5,000 per "With the attractiveness of MLDs and big-ticket insurance investments
month from the age of 60 years, diminished, HNIs may allocate more towards debt mutual funds," said N S
depending on their contributions, Venkatesh, CEO of the Association of Mutual Funds in India (Amfi).
which itself would vary based on the
"Mutual funds would benefit from the change in the taxation of insurance
age of joining the APY, it said.
products and MLDs. Limits on capital gains on real estate investment also
The same pension would be paid to the augurs well for debt funds," said A Balasubramanian, managing director and
spouse of the subscriber after the chief executive officer, Aditya Birla Sun Life AMC.
demise of the subscriber and on the
In the latest Budget, the government has proposed higher taxes on MLDs
demise of both the subscriber and
by imposing a short-term capital gains tax, irrespective of the investment
spouse, the pension wealth as
time frame. As of now, investments in MLDs for more than a year qualify
accumulated till age 60 of the
for long-term capital gains tax at 10 per cent. With the change in taxation,
subscriber would be returned back to
investors will have to pay tax at their slab rate, which can be as high as 30
the nominee, it said.
per cent.
However, this may not be the end of the road for MLDs, feel analysts. "MLDs
No plan to exit Adani
may have lost the tax advantage but they remain a unique offering.
stocks: LIC chairman These are still one-of-a-kind quasi-equity products that come with downside
LIC chairman M R Kumar said that protection," said Dhaval Kapadia, director, portfolio specialist, Morningstar
fluctuations in Adani Group stocks' Investment Adviser India.
prices would not impact the
In the case of insurance, the government has removed tax exemptions for
corporation's bottom line, and that the
insurance policies with premia of over Rs 5 lakh.
market value of LIC's investment in
MLD is a structured product that provides returns based on the performance
Adani shares is considerably higher
of an underlying index or security. Since most MLDs offer principal
than their book value. Kumar added
protection, they are deemed to be a fixed-income investment option. As
that no provisioning was required in
MLDs require a minimum investment of Rs 10 lakh, their investors are mostly
respect of Adani companies as the
HNIs.
debt is a 'standard asset'. LIC makes
provisions for diminution in the equity
share prices. Kumar confirmed that LIC investment in Adani Group is just 4.2%
value on a portfolio basis and not for
had sought a meeting but said there of that figure.
individual stocks, he said.
was no timeline. "We want to
Kumar said that LIC's investment in
The chairman said that the understand what's happening in the
Adani Group companies is well within
corporation did not have plans to sell markets, why it is happening, and if
limits prescribed by the insurance
its stake in Adani Group companies. they can throw some light on it. We
regulator.
"At least two of the group companies, want to know their business profile,
in which we were invested for what they are planning to do and how
decades, were later acquired by Adani they will manage," said Kumar. Punjab National Bank to
Group. If some foreign or sovereign
Kumar reiterated that LIC's exposure divest stake in Canara
funds are exiting, that is how they do
to Adani Group is 0.97% of its total
their business. We buy and hold for the HSBC OBC Life Insurance
assets under management, and its
long term. Why should we be selling Punjab National Bank (PNB) will divest
exposure to the group is Rs 35,917
ACC & Ambuja now?" said Kumar. its stake in Canara HSBC OBC Life
crore. The book value of LIC's
Insurance Co, the lender said.
LIC had earlier sought a meeting with investment in equities is around Rs 6.9
Adani Group in the wake of the rout in lakh crore, and the book value of the PNB had acquired a stake in the life
12 March 2023 The Insurance Times