Regulations
Government issues summons to insurance companies for tax evasion

Companies including Birla Sun Life Insurance, ICICI Prudential, HDFC Life Insurance, MetLife Insurance and Reliance Life among others have been issued summons by the Finance Ministry as part of its probe into alleged service tax evasion of over Rs300 crore

New Delhi: The Finance Ministry has issued summons to about a dozen insurance firms seeking documents pertaining to sale of insurance policies and commission paid to their field associates as part of its probe into alleged service tax evasion of over Rs300 crore by them, reports PTI.

 

Official sources said that companies including Birla Sun Life Insurance, ICICI Prudential, HDFC Life Insurance, MetLife Insurance and Reliance Life Insurance Company among others have been issued summons by Directorate General of Central Excise Intelligence (DGCEI), an intelligence arm under the Finance Ministry.

 

An email query seeking response from HDFC Life Insurance, MetLife Insurance, Birla Sun Life and ICICI Prudential was not answered. However, a Reliance Life Insurance Co (RLIC) spokesperson confirmed receiving a letter from the department seeking information.

 

"We have received a letter from the DGCEI seeking some information. We understand that this is part of a process wherein the department has sought similar information from several other insurance companies.

 

"RLIC is in full compliance with applicable laws and regulations and will be providing the required information as desired," the spokesperson said.

 

Preliminary probe so far has found alleged irregularities including evasion of service tax by misrepresenting the information on accounts book and fudging records related to commission paid to field associates, agents and brokers who were selling the insurance policies, the sources said.

 

The notices were sent under Section 14 of the Central Excise Act 1944 to the companies, they said.

 

The Act empowers a central excise officer to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry being undertaken by the officer.

 

"One of the companies was paying more commission to their brokers and field associates but avoiding payment of service tax on the amount. There were discrepancies in records of payment given to such brokers maintained by it," a source said.

 

The DGCEI started its discreet probe early this year and expanded it after more documentary evidences proved that the amount of evasion may be running into several hundred crores.

 

"As per the initial investigations, the amount of evasion is at least Rs 300 crore. The department is investigating the matter," a DGCEI official said.

 

All general policies including insurance against risk of loss to assets like motor vehicle is 12.36% on the annual premium paid. Whereas, the rate of service tax varies on the part of premium taken towards risk coverage for life insurance, according to a service tax expert.

 

Officials said that in some of the cases companies were deducting service tax from agents who were selling their products but did not show it on their accounts book.

 

Whereas, there have been instances where the companies were giving incorrect data of the total policies sold or renewed by them to evade tax, the source said.

 

The total annual premium income of the insurance industry comprising life, non-life and health, is around Rs3.5 lakh crore, as per the Insurance Regulatory and Development Authority (IRDA) data.

 

According to DGCEI officials, insurance firms representatives will also be called in to explain alleged discrepancy in payment of service tax to the government exchequer.

 

"We will call the Chief Financial Officer of the defaulter firms to explain alleged wrong doings. The notice seeking personal appearance may be sent by early next month," the official added.

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IRDA asks SBI Life to distribute excess payments

IRDA directed SBI Life to identify the member or beneficiaries for each master policy and distribute the wrongful administrative charge by way of refund

 
New Delhi: The Insurance Regulatory and Development Authority (IRDA) has directed SBI Life Insurance Company to distribute the 'wrongful' component of administrative charges it paid as reimbursement of group expenses to commission agents to the members or beneficiaries of the concerned policies, reports PTI.
 
As per the guidelines, life insurers are not allowed to pay towards management expenses, documentation expenses, profit commission, bulk discount or any other payment to the agent, corporate agent, group organiser or group manager.
 
SBI Life Insurance had made certain payments towards reimbursement of group administrative expenses to various master policy holders, which were in 'violation' of IRDA guidelines and for which it was imposed a penalty of Rs70 lakh in July 2011.
 
"For this purpose (distribution), recalculate the premium chargeable for each member of each group insurance scheme of the life insurer without taking into consideration 20% of premium that is paid to Master Policy Holders," Insurance Regulatory Authority of India (IRDA) said in its directive.
 
"Distribute the wrongful administrative charge amongst the respective members/beneficiaries of each Master Policy by way of refund...," it added.
 
The schemes in question included 'Super Suraksha' policies on home, car and tractor loans.
 
The regulator said these payments to master policyholders were not in the interest of the general policyholders.
 
IRDA directed SBI Life to identify the member or beneficiaries for each master policy, against which reimbursement were made towards administrative expenses as a percentage of premium.
 
IRDA said the directives should be immediately initiated and be completed within six months.
 
SBI Life Insurance is a joint venture between State Bank of India and France's BNP Paribas Cardif. SBI owns 74% of the total capital, while the French insurer owns the rest.
 

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Reliance Life seeks IRDA nod for two health insurance plans

Reliance Life has filed two health plans, one a reimbursement health plan and another one a simple fixed benefit plan and is awaiting approval from the insurance regulator

 
New Delhi: Private insurer Reliance Life has sought approval of the Insurance Regulatory and Development Authority (IRDA) for two new health plans and is aiming to launch them in current quarter, reports PTI.
 
"We have filed two health plans with the regulator. One is a reimbursement health plan and another one is a simple fixed benefit plan. We are awaiting approval from the regulator," Reliance Life Insurance President and Executive Director Malay Ghosh told PTI.
 
"Once it is approved by IRDA, we will take two to three weeks to introduce the health plans in the market," he added.
 
Currently, Reliance Life Insurance has a lone pure reimbursement health insurance plan - 'Reliance Life Care for You Plan'- for individuals and family members.
 
Ghosh said these two health plans will strengthen the company's existing health insurance basket. "Besides, this will help us consolidate our position in the health insurance space among life insurance players."
 
Reliance Life Insurance had forayed into the pure health insurance space in 2010.
 
"Our venture and journey into the health insurance sector is a natural extension of our life insurance business. We aim to help people meet their health care exigencies and expenses at every stage of life effectively on the back of a slew of health products," he said.
 
Last week, Finance Minister P Chidambaram had announced various measures for benefit of the life insurance sector with a view to benefit the insurance companies as well as the policyholders.
 
He also urged IRDA to consider 30-day norm for clearance of products. Such a move would help insurance companies launch their product faster.
 
Reliance Life is also seeking IRDA approval for a pension accumulation plan, which it is looking to launch in the next couple of months.
 
Several private insurance companies are mulling offering new pension schemes after IRDA revised pension product guidelines and removed the 4.5% return guarantee requirement.
 
Reliance Life Insurance would be among the first few to launch a fresh pension plan. With this new annuity product, Reliance Life is also planning to give capital
 

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