Life insurance policyholders can look forward to more tax concessions as Finance Ministry is considering a proposal to do away with service tax on first premium and create separate exemption limit for pension schemes in the upcoming Budget.
Besides, the tax authorities are examining whether service tax may be assessed on realisation basis as against the current practice of levying duty on the premium on accrual basis.
Presently, service tax is paid on dues or receipt of amount, whichever is earlier. However, some of amounts due are never received; similarly amounts received in advance with proposal are not converted into policy.
Industry has demanded that service tax liability should be on the basis of receipt of amount and subsequent conversion as premium.
Sources said the Income Tax Department is considering creating a separate exemption limit for some insurance pension products over and above the existing limit.
Currently under the Income Tax Act, Rs 1,00,000 income tax deduction is allowed on the premium paid along with other approved investments.
Industry is expecting that Finance Minister P Chidambaram may make an announcement in this regard which will benefit the consumers as well as the life insurance industry.
The slew of incentives being considered by the government for boosting life insurance industry include higher incentives for agents selling policies, sources added.
TDS threshold on agents’ commission should be too raised to Rs 50,000 from the existing Rs 20,000 since most of life insurance agents are now in a low-income bracket, Max Life Insurance Managing Director Rajesh Sud said.
The Central Board of Direct Taxes is also considering whether the total sum paid for post-retirement medical scheme could be made eligible of income tax deductions.
Finance Minister has been pitching for the need to push savings in financial instruments rather than in ‘unproductive’ assets like gold. The spurt in gold imports has aggravated the current account deficit.
Concerned over subdued growth in the insurance sector, Chidambaram had asked the insurance companies to refrain from mis-selling and devise simple products for people to boost growth in the sector.
“In my view, the reason why insurance is stumbling in India is because of mis-selling of products and complex products. If you want to sell insurance to India, you must sell simple products and must make it absolutely clear to agents and other officers that they should not mis-sell,” Chidambaram had said.
Keywords: Life insurance policyholders, Life insurance, tax concessions for Life insurance, life insurance sector, Finance Ministry, service tax on first premium, exemption limit for pension schemes, pension schemes, Union Budget 2013-14, Income Tax Department, Income Tax Act, Finance Minister P Chidambaram, P Chidambaram, TDS threshold on agents’ commission, Max Life Insurance Managing Director Rajesh Sud, Central Board of Direct Taxes, savings in financial instruments, savings in gold