INSURERS SEEK SEPARATE TAX SOPS FOR LONG-TERM SAVINGS
20 February, 2008
A separate tax relief for long-term savings, incentives for health insurance and greater enablement of investments in infrastructure top the wish list of insurance industry for the Union Budget 2008-09.
At present the Rs 1 lakh exemption under Section 80 C also includes short-term saving instruments like mutual funds and fixed deposits. As the life insurance and pension address the long term needs of a common individual, the Government should look at providing a separate limit for long-term savings, Bert Paterson, Managing Director, Aviva India, said.
According to V. Raja Gopalan, Chief Actuary, ICICI Prudential Life, the Insurance Council had already recommended to the Government separate tax relief for long-term savings. If the insurance spending is going to be a part of Section 80 (C), you are certainly not encouraging long-term savings, he opined.
U.S. Roy, Managing Director and Chief Executive Officer, SBI Life, sees need for a significant increase in the exemption limit (Rs 15,000 currently) to buy health insurance products. Paterson also feels that the tax benefit on pensions and long-term savings contribution need to be increased.
Countries like the UK and Ireland provide incentives in the form of tax credits even to non-tax payers by topping up their contributions by 20 to 25 percent and even up to 40 percent for higher tax payers. If the Government does not raise the tax benefit to at least Rs 1 lakh, separately, for pensions, we will see less long-term retirement savings amongst the masses, he pointed out.
As per Insurance Regulatory and Development Authority (IRDA) norms, the insurance companies can invest not less than 15 percent in the infrastructure sector. However, the insurance sector can further enable investments in infrastructure development to sustain Indian economic growth story, says Roy.
As has been the case with every Budget, many firms are also seeking flexibility in foreign direct investment (FDI) norms. Hiking the FDI to 49 percent (from current 26 percent) will enrich the business,Ajay Bimbhet, Managing Director, Royal Sundaram Alliance Insurance Company Ltd, said.
Waiver of service tax, provision to carry forward losses up to 12 years (from current eight years) and extension of exemption on rural health premium to the private insurers, among others is also on the wish-list.