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| Union Budget gives relief to non-life insurers |
| BS Reporter / Mumbai Mar 02, 2010, 00:41 IST |
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The government’s decision to roll back tax on unrealised gains on the investment income of non-life insurers has brought relief to these companies. The public sector companies, which have 60 per cent of the market, will be the biggest beneficiaries.
Insurance companies said the industry would otherwise have had to pay around Rs 3,000-4,000 crore as tax on the unrealised gains. Public sector insurers, already bleeding due to underwriting losses, would have been the worst hit.
Last year, the government had decided to levy tax on both realised and unrealised gains of the general insurance industry. Insurers were to pay tax on the unrealised gains from this financial year.
“The impact of this would have been substantial if the government had not rolled it back,” said S Sreenivas, CFO, Bajaj Allianz General Insurance Company.
In a pre-budget representation, the industry had asked the government to drop the provision, since the Insurance Regulatory and Development Authority (Irda) does not require companies to include the unrealised gains in their profit and loss accounts.
According to Irda guidelines, the appreciation in the value of investments, in the nature of unrealised gains, is not taken into account for determining profit or loss of non-life insurance business.
“The unrealised gains due to appreciation in the value of investments will not be included in the total income. Similarly, deduction will not be allowed for provision for losses due to diminution in the value of investments, as this is not a realised loss,” the government proposed in the budget.
“This is more like a clarification on the earlier regulations,” said Rakesh Jain, Director-Corporate Centre and CFO, ICICI Lombard.
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