19 July 2019
INDIA: Budget Approves 100% FDI for Insurance Intermediaries
Overseas ownership of insurance intermediaries active in the country has now been given the go-ahead. This entitlement will extend to insurance agents and brokers, corporate agents, third-party administrators, surveyors/loss assessors and a number of other insurance intermediary businesses. Previously, foreign direct investment (FDI) was capped at 49% for all the country’s insurance-related businesses.
The move, which was announced as part of the 2019 Budget, is expected to give a boost to the country’s insurance intermediary market, a sector that has remained largely fragmented. While FDI in other insurance-related sectors will continue to be capped at 49% for the time being, it is expected that further opening up will be announced in due course.
Among the Budget’s other FDI-related changes are proposals to ease the local sourcing requirements for single brand retail companies. At present, while 100% foreign ownership is permitted for such operations, they are obliged to source at least 30% of their stock locally, although exemptions have been permitted in certain instances.
Among other the Budget developments that may be of interest to overseas investors is a move to raise the threshold of the country’s reduced Corporate Income Tax (CIT) rate. This will see companies with annual turnovers of INR4 billion (US$58.45 million) or less eligible to pay CIT at the reduced rate of 25%, 5% lower than the standard rate. The 25% CIT rate previously only applied to companies with an annual turnover of INR2.5 billion or less.