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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.

Content provided by Picture: HKTDC Research
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