Comment: Rajesh Sud

Not in line with our request for fiscal support

The finance minister has increased the service tax burden on life insurance policies. In ULIP, where service tax was earlier charged only on mortality and fund management charges, it will now be charged on a portion of the premium other than what is allocated for investment. In case of traditional endowment plans, the service tax rate has been increased from 1.03 per cent to 1.545 per cent. Although the increase is marginal, it is not in line with our request for fiscally supporting long-term savings contracts, such as life insurance.

The finance minister’s assurance to take up the Insurance Bill during 2011-12 is welcome. This may increase FDI limits in the insurance sector to 49 per cent, which would attract domain capital.

 

There wasn’t any clear indication of continuation of EEE (Exempt-Exempt-Exempt) in the proposed Direct Taxes Code to be implemented from April 1, 2012. EEE is an important incentive to invest in long-term savings instruments such as life insurance and hence should be retained. The Budget has not addressed the need to promote long-term savings through a separate limit for tax exemption.

Rajesh Sud, MD & CEO, Max New York