Tax sops may boost sagging insurance sector in 2013
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The long-pending Bill seeking to raise FDI limit to 49 per cent in insurance business remained stuck in 2012, although going ahead the sector may see some action with the government expected to extend tax sops to boost the sagging industry.
Prodded by Finance Minister P Chidambaram, the tax authorities and insurance regulator Irda are working on the possibility of removing Service Tax on first premium and create separate exemption limit for pension schemes.
A slew of incentives being considered by the Finance Ministry may provide the much-needed booster dose to the life insurance industry.
The Department of Revenue is examining whether, in addition to NPS, some insurance pension products - as approved by Irda - may be included in the separate limit over and above the limit of Rs 1 lakh under section 80C of the IT Act for the purpose of income tax deduction on the premium paid.
Besides, the Department is looking into the proposal of exempting annuity policy from service tax in line with National Pension Scheme (NPS) and may reduce the levy on single premium products.
The CBDT is considering whether the total sum paid for post-retirement medical scheme could be made eligible of income tax deductions.
The announcements by the Finance Minister are expected to stimulate the growth of the sector.
"I am sure all the draft guidelines will be finalised in the first quarter of the year. I am also confident that 2013 will see the collaborative efforts to grow the life insurance
sector gaining further strength. This will result in a clearly laid out roadmap for the sector," Max Life Insurance Managing Director Rajesh Sud said.
Echoing similar views, Reliance Life Insurance, President and Executive Director Malay Ghosh said: "We hope to see several enabling regulations, as mentioned by the Finance Minister, in the next few months to drive stable growth for the industry in the coming years."