 Broadly insurance can be classified in two categories: First - Life Insurance which matures in event of death of the insured/policyholder. On occurrence of such an event the insurance company pays a sum of money assured to the nominee/beneficiary (person nominated by the policyholder). Life Insurances are of two types: Traditional Plans - which contain Endowment Plan , Cash Back Plan, Term Plan , (Term Life Insurance) and Whole life policy. And Unit-linked Insurance Plans - are of 4 types - Endowment cum Ulips, Children Plan , Retirement Plan or Pension plan and investment/saving plans. Second - General insurance. All insurance policies other than life insurance policies come under general insurance segmentation. (Also known as non-life insurance policies). These policies include Home Insurance, Auto Insurance, Travel Insurance, Marine Insurance, Theft Insurance, Office insurance and Health insurance Health insurance is most acquired policy in general insurance segment. Health insurances are of 3 types - Comprehensive Plan - which include Mediclaim and Fixed benefits plan, Accidental Insurance and Critical Care plan . |
Life insurers have proposed that they be allowed to float ULIP infrastructure bonds to raise long-term resources for the core sector. Other items in industry’s budget wishlist include allowing them to carry forward losses for 12 years and new tax breaks for policyholders.
The representation to the finance ministry has been made by the Life Insurance Council, the industry association of life insurance companies. In the memorandum, the industry has sought introduction of a separate limit of Rs 1 lakh per year in respect of income tax exemptions for long-term financial savings instruments under section 80C of the Finance Act.
The council has argued that existing provisions allow tax deduction for instruments made in short-term savings instruments such as MFs, bank deposits and long-term savings such as pensions and life insurance. At present, the aggregate exemption is Rs 1 lakh per year, but this includes deductions under section 80CCC and 80CCD.
The limit is a combined one for savings of various types. All short-term or medium-term, and a few expenses like education, are included within the present Rs 1-lakh exemption limit.
“Life insurance and pensions are probably the only avenues for long-term savings. Therefore, it is necessary to encourage long-term savings affirmatively. The investor preference tends to favour short-term investments in the absence of a clear differentiation and incentive for long-term investments. The council has been making this submission to the government in the past, too.” said Life Insurance Council secretary general SV Mony.
Life insurance companies, which entered the health insurance business, have also pushed for a doubling of tax deductions available for health insurance premium. The limit is currently Rs 15,000 and Rs 20,000 for senior citizens. Among other requests, the industry has asked that life insurance agents be exempted from service tax as long as their service charges are less than Rs 8 lakh.
The industry’s reasoning is that Central government exempts from service tax, taxable services of aggregate value not exceeding Rs 8 lakh in a year. This exempts small service providers from paying service tax. In the case of life insurance agency commission, the service tax is remitted by the insurance company.
However, the insurers say that agents should come under the Rs 8-lakh category since they pay service tax only for convenience and the incidence of tax is actually on agents’ earnings. At present, there is no exemption for infrastructure bonds. The mutual fund industry has sought exemptions for purchase of units in schemes that invest in infrastructure.
Life insurers have sought similar relief for unit-linked insurance schemes that are in the nature of a bond and invest in the core sector. The industry’s reasoning is that customers of the life industry are on the look out for long-term investments and life insurers can provide them this option.
Source: Economic Times
