| Life Insurance Council, the industry body of life insurance companies in India, in its pre-budget memorandum to the Union finance ministry has sought the introduction of a separate limit of Rs 1 lakh per annum income tax (I-T)exemption for long-term financial savings instruments under Section 80C of the Finance Act.
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| Currently, the limit under Section 80C provides for deduction for instruments including both short-term savings instruments such as mutual funds, bank deposits and long-term savings viz. pensions and life insurance.
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| The aggregate exemption is currently Rs 1 lakh per annum including deductions under section 80CCC and 80CCD. The Council has recommended the provision of a standalone deduction of Rs 1 lakh for contribution to pension plan of a life insurer to encourage long-term savings.
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| At present, compulsory pension schemes are available only for government employees. Private sector employers provide pension through insurance companies on a voluntary basis. The Council has also sought I-T exemption for infrastructure ULIP bonds as these represent long-term investments directly channelled for infrastructure development.
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| SV Mony, secretary general, Life Insurance Council, said: “Life insurance and pensions are probably the only avenues for long-term savings; therefore it is necessary to encourage long-term savings affirmatively. Investor’s 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.”
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| Insurers have also asked for a provision to carry forward losses, which would be set off against future profits for life insurance companies. According to the current rules, no business loss shall be carried forward for more than eight assessment years immediately succeeding the assessment year in which the loss was first computed.
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| However with high growth being witnessed by life insurance industry, the average break-even period for life insurance has increased to 10 to 12 years. Insurers, therefore, want the period for carry-forward and set-off of losses be increased to 12 years for life insurance business.
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| Other recommendations include increasing the limit for deduction under section 80D in respect of health insurance premium to Rs 30,000 (Rs 35, 000 for senior citizens) from the present Rs 15,000 (Rs 20,000 for senior citizens) and to extend the benefit of service tax exemption below threshold limit of Rs 8 lakh in a year to insurance agents. |
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