Tax cut likely for life insurance sector in upcoming Budget

lifeinsurance/ There is a good news for life insurance policyholders, as the Finance Ministry has given an indication that the ministry is considering a proposal to wave off service tax on first premium and create separate exemption limit for pension schemes in the three-months long upcoming Budget session beginning on Thursday. 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. As present, 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. Under the existing Income Tax Act, Rs 1 lac income tax deduction is allowed on the premium paid along with other approved investments. The industry is expecting from the ministry to make an announcement in this regard which will benefit the consumers as well as the life insurance industry. According to the sources, various incentives are being considered by the government for boosting life insurance industry including higher incentives for agents selling policies. 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. The Finance Minister Mr. Chidambaram has been batting for the need to push savings in financial instruments than in assets like gold. He pronounced such type of assets 'unproductive'. “The spurt in gold imports has aggravated the current account deficit," he said. Concerned over subdued growth in the insurance sector, Finance Minister Mr. Chidambaram had said, “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. source:insuringindia news