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What is your Wish list from Budget 2005-06 for the insurance sector?
Last year's budget levied a service tax of 10% on the risk premium for life
insurance policies. The levy is unwelcome. India is an under insured country
and such service tax will unnecessarily make the policy expensive and also a
complicate the payment of life insurance premium. My strong recommendation
will be to withdraw the service tax on risk premium.
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Life Insurance is a long-term business. It is not appropriate that the tax levy for insurance industry changes rapidly. We have had the unfortunate experience post opening up of life insurance sector that in every budget in the last three years the tax incidence has changed.
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The insurance industry is still hoping for additional exemption limit under Section 80CCC and that maturity proceeds of single premium insurance products shall not be taxed. The industry is hopeful that the two recommendations are considered favourably by the finance minister.
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The service tax on risk premium, the service tax on agency commission, the turnover tax on securities trading will increase the cost of operation of insurance companies and will affect the returns to the policyholders.
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The tax breaks under section10 (10D) should continue as it is. In fact more tax relief to mobilise long-term savings would be welcome.
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The principal portion of the annuity currently attracts tax - that should be removed.
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Moreover, the support in terms of FDI hike should further get strengthened, as it would certainly give boost to the sector.
What are your overall hopes from the Budget for the economy?
The budget would continue to support the current upbeat mode. There will be
measures to maintain the GDP growth rate. We expect a greater focus on infrastructure sector. Further widening of tax
base is also imperative. Fiscal deficit issue will be addressed by controlling government
expenditure.
Courtesy: www.Insuremagic.com