Regulations
IRDA to frame policy for automatic clearance of life products

IRDA, in consultation with insurers, will identify or design certain standard products which can be used by the industry under Use and File system

 
New Delhi: Insurance Regulatory and Development Authority (IRDA) will come out with a new policy to accord automatic clearance to the standard life insurance products and relax investment guidelines to encourage fund flow into infrastructure sector, reports PTI.
 
"Use and File system may be introduced. IRDA, in consultation with insurers, will identify or design certain standard products which can be used by the industry under Use and File system, if the insurance company complies with the conditions attached to the standard product," Finance Minister P Chidambaram said.
 
He was briefing reporters on decisions taken to give a fillip to the life insurance industry.
 
At present, IRDA approves all insurance products on File and Use basis which means that insurance companies can sell the product only after getting approval from the insurance regulator.
 
Chidambaram had earlier this month met the heads of life insurance companies and IRDA chairman J Hari Narayan to work out steps to boost the insurance sector.
 
He said in a country with low spread and penetration of life insurance, the objective should be to sell simple and easily understood products.
 
Such products will automatically be deemed to have been approved after 15 days of its intimation to IRDA unless it finds non-compliance within that period, he said.
 
IRDA shall take necessary action against the company in case any violations are noticed, Chidambaram said, adding, the regulator should expand such list of standard products on a continual basis.
 
In order to encourage investments in infrastructure sector, he said, IRDA will allow investments in an infrastructure special purpose vehicle (SPV) floated by any company.
 
Under this, the SPV should be a wholly-owned subsidiary of the parent company and the debt instrument issued by the SPV is guaranteed by the parent company, having due regard to rating criteria.
 

User

Government looking at tax sops for life insurance policy holders

The slew of incentives being considered by the Finance Ministry for boosting life insurance industry include reduction in service tax on first premium, separate tax exemption limit for pension plans and greater incentives for agents selling policies

 
New Delhi: Life insurance policyholders can look forward to more tax concessions with Indian Finance Minister P Chidambaram asking the revenue department to look into the possibility of removing service tax on first premium and creating separate exemption limit for pension schemes, reports PTI.
 
Chidambaram said he has asked the 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 10th October.
 
The slew of incentives being considered by the Finance Ministry for boosting life insurance industry include reduction in service tax on first premium, separate tax exemption limit for pension plans and greater incentives for agents selling policies.
 
The Ministry has formulated this proposal following a review of life insurance sector in consultation with heads of various companies and Insurance Regulatory and Development Authority (IRDA) chairman J Hari Narayan.
 
"Department of Revenue will examine whether, in addition to National Pension Scheme (NPS), some insurance pension products as approved by IRDA may be included in the separate limit over and above the limit of Rs1 lakh under section 80C of the IT Act for the purpose of income tax deduction on premium paid," Chidambaram said.
 
The Revenue Department, Chidambaram said, would also look into the proposal of exempting annuity policy from service tax in line with NPS and also reducing the levy on single premium products.
 
With regard to social security insurance schemes, he said the tax authorities would examine whether first year premium and subsequent premiums on such schemes like Janshri Bina Yojana (JBY) and Aam Adami Bima Yojana (AABY) could be exempted from service tax. Also the possibility of exempting micro-insurance from this levy.
 
He further said a similar exercise would be done for the non-life insurance sector. 
 
Chidambaram said the CBDT would consider whether the total sum paid for post-retirement medical scheme could be made eligible for income tax deductions.
 
To encourage agents, Chidambaram said the CBDT would look at the possibility of tax deducted at source (TDS) rules.
 
"At present, TDS applies on every payment of commission to an agent above Rs20,000. CBDT will examine whether the exemption can be shifted from every payment of commission to a cumulative commission payment exceeding, say, Rs50,000 or any other suitable threshold in a year," he said.
 
The CBEC will be requested to examine whether service tax may be assessed to realisation basis, he said.
 
At present, service tax is levied on premium on accrual basis. So even if the actual realisation does not happen, the life insurance company has to pay service tax based on accrued or assumed income.
 
"CBDT will examine whether existing policies can be grandfathered whenever changes are made to direct tax laws, so that changes will apply only to policies issued prospectively," he said.
 
The proposed amendments to the insurance laws were also discussed with IRDA, he said, adding, some of the issues raised by the insurance companies have already been addressed in the Insurance Laws (Amendment) Bill, 2008, that is pending before Parliament.
 
In respect of some other issues, further amendments, if necessary, will be introduced as official amendments to the pending Amendment Bill, he added.
 

User

COMMENTS

MOHAN SIROYA

4 years ago

All this talk is only about the "Life Insurance". Not a wpord abou the Medi-claim /Health Insurance policies ,especailly for the 130 million Senior citizens (No. Growing up fast). If a person is paying a hefty sum of Rs. say 30K per annum + ST on a Medi-claim policy, why the IT exemption should remain bogged down to mere Rs. 15K ?
very sad economics of the Govt. headed by an Economist .
Perhaps here also, the Govt. only wants to appease the salaried persons or the Govt./Semi Govt. employees.
This is also a "Tough Question" to be answered by this Govt.

Mohan Siroya

Global Learning

Studies, surveys, regulation, misconduct and savers’ behaviour from around the world

Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MSSN member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)