Irdai recommends waiver of service tax on insurance premium

Insurance sector regulator Irdai has recommended waiver of service tax on the premium amount being paid by policyholders in order to have a level playing field with other financial products, a top official said today.
It has also suggested extension of tax-break on pension products of life insurance companies on lines of that introduced by the Centre for additional investment of Rs 50,000 under National Pension System (NPS) last year.
"Every year, government asks us to submit our recommendations before the Budget. So this year too we have submitted our recommendations before the government.
"We want that there should not be any service tax imposed on the premium investors pay for the insurance policies," Irdai Member (Life) Nilesh Sathe told reporters here on the sidelines of an event organised by Association of Insurance Claims Management (AiCM).

"There is a service tax on maturity where along with bonus, sum assured is also taxed. This is in contrast with the banking system where only interest is taxed, not the principal amount," he said.
Speaking on Irdai's suggestion for extension of tax-break on pension products of life insurers, he said, "We also want that like NPS, for which the government has permitted tax-break on additional amount of Rs 50,000 investment, the same tax-break should be extended to the insurance sector too."
"Life insurers also have pension plans and if they get the tax-break facility on the lines of NPS, then there would be level playing field to the sector," he added.

In Budget 2015-16, the government had announced income tax relief on additional investment of Rs 50,000 as contribution to NPS under the Section 80CCD.