In the upcoming Budget, which will be presented by Finance Minister Arun Jaitley on February 1, stakeholders from different sectors will look for announcements and their possible impact on the market. The country’s insurance industry, which comprises more than 50 companies, has some challenges that need to be addressed, say experts. Industry body Ficci has said that insurers should be allowed to carry forward and set-off unabsorbed business losses for an indefinite period, in order to reduce the time required for them to break-even.
“The insurance industry has a long gestation period and it takes a long time to achieve a break-even. Accordingly, the limit of eight years for carry forward and set-off of business losses is not sufficient,”Ficci has said in its pre-Budget memorandum 2019-20.
Also, a level-playing field is required for pension plans of life insurance companies vis-a-vis National Pension Scheme, it said. “It is recommended that pension plans of life insurance companies should also be given a level-playing tax treatment as compared to the pension schemes of central government.”
Here are some of the expectations for the insurance sector listed by Ficci:
- Exempt annuity received out of maturity proceeds from pension fund established by insurance companies
Commuted amount received from pension fund established by insurance companies is exempt from tax under Section 10(23AAB) of the Income Tax Act. On vesting of the policy, the policyholder can currently commute up to one-third of the policy proceeds, which are received tax-free, according to Ficci. The balance two third of the pension fund is converted to an annuity policy and annuity is taxable. It is recommended that the annuities received should be made tax free, the industry body has said.
Also, while computing maturity proceeds from an annuity which are taxable, the premium amount paid with respect to keeping annuity in force should be reduced, according to Ficci.
- Exemption under section 10(10D) of the Act should be linked to the term of the policy
- Enhanced Deduction of Life Insurance Premium under Section 80C of the Act
- Revise Limit of reserve for unexpired risks
- Amendment in Section 194A to exclude interest component on compensation awarded by Motor Accidents Claims Tribunal