The Hindu Business Line : Provide tax benefit for long-term investments

To ensure a secure financial future for individuals, there is a dire need to differentiate between long-term and short-term savings and incentives the former. To ensure that people save for their old age, we need:

Long-term investments: The availability of similar benefit under Section 80C for both short and long-term instruments ends up encouraging short-term investments.

A separate limit for long-term investments such as life insurance and annuity under Section 80C may be considered.

The definition of ‘long-term investment’ could be any investment with an investment horizon of at least five years.

Exemption from service tax: The Finance Act, 2008 levies service tax on the entire range of charges in ULIP (earlier the levy was restricted to only risk cover charges). This results in higher cost of insurance for customers. Even if a complete exemption from service tax on all ULIP charges is not possible, an exemption from service tax on charges other than Fund Management/Administration Charges would provide relief and bring parity between ULIPs and mutual funds.

Exempting annuities from taxation: Exempting from tax the principal (savings) portion of annuity pay-outs may be considered.

Taxing the whole annuity payout, which is the current tax regime, leads to double taxation.

Health insurance sector

With the increasing incidence of health spends and growing number of uninsured population, coupled with the gap in the current health cover, health insurance has been acknowledged as one of the most efficient means to meet and manage health spends.

Therefore, the need of the hour is to ensure that each individual is adequately covered for any medical contingency that may arise. Enhancing tax exemptions on the premiums paid for health coverage can give great impetus to the health insurance segment. We would like to recommend:

Enhance tax exemption under Section 80 D: With medical expenses growing at a rate higher than overall inflation along with increasing medical expenses, which influences the health insurance premiums people pay, there is an urgent need to further enhance the limit under Section 80D.

To enable greater health coverage, the Government may consider allowing an exemption of up to Rs 30,000 a year per person for health insurance premiums paid for self and dependants.

Puneet Nanda,

Executive

Vice-President,

ICICI Prudential Life