Life Insurance Policyholders Can Hope For More Tax Sops

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Life Insurance Policyholders Can Hope For More
Tax Sops
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• Life Insurance policyholders can look forward for
  more tax concessions as finance ministry is
  considering slew of incentives to boost life
  insurance industry.
• Finance minister has asked Central Board of
  Direct Taxes (CBDT) and Central Board of Excise
  and Customs (CBEC) to give their report on the
  changes in the tax structure for life insurance
  companies by 10 October 2012.
• The slew of incentives being considered by
  finance ministry includes-
• Finance minister, P. Chidambaram, has asked
  revenue department to look into the possibility
  of removing the service tax on first year
  premium.

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• The department of revenue will examine whether,
  in addition to NPS, some insurance pension
  products as approved by IRDA may be included in
  the separate limit over and above the limit of Rs
  1 lakh under section 80C of income tax act, for
  the purpose of income tax deduction on premium
  paid.
• The revenue department will also look into the
  proposal of exempting annuity policy from service
  tax in line with New Pension Scheme (NPS) and
  also reducing the levy on the single premium
  products.
• With regard to social security insurance schemes,
  tax authorities will examine whether first year
  premium and subsequent premiums on such schemes
  like Janshri Bema Yojana (JBY) and Aam Adami Bima
  Yojana (AABY) could be exempted from service tax.
• Revenue department will also look into a
  possibility of exempting micro insurance from
  service tax.

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• CBDT will also consider whether the total sum
  paid for post-retirement medical scheme could be
  made eligible for income tax exemptions.
• To encourage agents, CBDT will look at the
  possibility of Tax Deducted at Source (TDS)
  rules. At present, TDS is applied on every
  payment of commission to an agent above Rs
  20,000. CBDT will examine whether the exemption
  can be shifted from every payment of commission
  to a cumulative commission payment exceeding,
  say, Rs 50,000, or any other suitable threshold
  in a year.

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• Finance ministry will also request Retirement
  Insurance Company to examine whether service tax
  may be assessed to realization basis. At present,
  service tax is levied on premium on accrual
  basis. So even if the actual realization does not
  happen, the life insurance company has to pay
  service tax on accrued or assumed income.
• CBDT will also examine whether existing policies
  can be grandfathered whenever changes are made to
  direct tax laws, so that changes will applied to
  only policies issued prospectively.

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