Taxpayers may get some relief from Budget 2012-13

Pranab Mukherjee is expected to raise the income tax exemption limit to at least Rs2 lakh and may also marginally raise the slabs in other tax brackets of 10%, 20% and 30%.

New Delhi: Taxpayers will be looking forward to some relief from Finance Minister Pranab Mukherjee who is expected to raise the income tax exemption limit to at least Rs2 lakh in his budget proposals to be unveiled in the Lok Sabha on Friday, reports PTI.

The Minister may also marginally raise the slabs in other tax brackets of 10%, 20% and 30%. The Direct Taxes Code (DTC) Bill has also made a mention of it.

The DTC, which will replace the Income Tax 1961, however, will only come into force from 2013-14 and the Minister may make a formal announcement on it in his budget speech.

The Standing Committee of Parliament that has scrutinised the DTC Bill has already submitted its report to the Lok Sabha Speaker.

Although the Committee had suggested raising the tax exemption limit to Rs3 lakh, it is unlikely that Mr Mukherjee will agree to it in view of the need to contain fiscal deficit.

With limited space for give aways, the Budget is likely to balance populism with some tough measures to check tax evasion and generation of black money.

However, in view of reverses in the recently concluded state assembly elections, Mr Mukherjee may go slow on economic reforms like foreign direct investment (FDI) in multi-brand retail and further opening of the insurance sector to foreign investment.

There could be some bad news for prospective car buyers as government may hike duties on luxury items to raise resources.

The biggest challenge before Mr Mukherjee would be to arrest decline in economic growth which is expected to touch a three year low of 6.9% in the current fiscal, down from 8.4% in the two previous years.

Further, the government is likely to set disinvestment target for the next fiscal at Rs30,000 crore.

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Share prices in a sideways move: Thursday Closing Report

A close of the Nifty below 5,300 and may see selling pressure accelerate. A close below 5,170 would be bearish

A status quo by the Reserve Bank in its quarterly policy review resulted in the market snapping its four-day gaining streak and closing in the negative. We may now see the Nifty moving sideways with a negative bias. The index may now move in the range of 5,170 and 5,400. Any close of the index below 5,170 may see the benchmark would be bearish. The National Stock Exchange NSE saw a lower volume of 77.30 crore shares.   

Snapping its four-day rally, the domestic market opened flat on cautiousness ahead of the Reserve Bank of India’s (RBI) mid-quarter policy review. The political drama that unfolded after railway minister Dinesh Trivedi announced a hike in rail fares in his budget speech yesterday also weighed on the sentiments. The Nifty opened one point lower at 5,463 and the Sensex started the day at 17,917, down two points from its previous close.

The opening figure of the Nifty was also its intraday high while the Sensex hit the day’s high a short while later with the index touching 17,918. The market traded sideways till around 11.00am, but witnessed a sharp drop as the central bank, in its policy review, decided to keep key rates unchanged.

The Nifty dipped below the 5,400 level by losing 65 points to 5,398 points following the announcement of the RBI’s policy statement. Similarly, the Sensex fell further by 194 points to trade at 17,726 at 11.30 am. All the sectoral indices, led by banking and consumer durables, were trading in the negative zone.

The sentiments continued to remain week as trade progressed. The indices fell to their day’s lows in the post-noon session with the Nifty falling to 5,362 and the Sensex going down to 17,623.

The market closed near the lows with the Nifty falling 83 points to 5,381 and the Sensex tumbled 243 points to settle at 17,676.

The advance-decline ratio on the NSE was negative at 474:1255.

Among the broader indices, the BSE Mid-cap index tanked 1.39% and the BSE Small-cap index declined 0.97%.

With the exception of the BSE IT index (up 0.09%), all other sectoral indices settled lower. The top losers were BSE Consumer Durables (down 3.66%); BSE Realty (down 2.66%); BSE Bankex (down 2.60%); BSE Capital Goods (down 2.04%) and BSE PSU (down 1.97%).

Hindustan Unilever (up 1.80%); Wipro (up 1.43%); NTPC (up 1.13%); TCS (up 0.72%) and Sun Pharma (up 0.38%) were the top gainers on the Sensex. The losers were led by DLF (down 4.76%); BHEL (down 3.37%); HDFC Bank (down 3.05%); ICICI Bank (down 2.47%) and ONGC (down 2.45%).

The top performers on the Nifty were HUL (up 1.99%); Wipro (up 1.16%); NTPC (up 0.90%); TCS (up 0.89%) and Sun Pharma (up 0.47%). The main laggards were Reliance Communications (down 5.30%); DLF (down 5.08%); IDFC (down 4.62%); BHEL (down 3.52%); HDFC Bank (down 3.46%).

Markets in Asia closed mostly lower following a report that China’s foreign direct investment (FDI) fell to $7.7 billion in February, down 0.9% on an annual basis. The Japanese market gained on the back of a weaker yen, which boosted exporters. The Chinese benchmark settled to a three-week low after the government said that it would curb any rise in property prices.

The Shanghai Composite declined 0.73%; the Jakarta Composite declined 0.35%; the Straits Times shed 0.02%; the Seoul Composite fell by 0.06% and the Taiwan Weighted lost 0.04%. On the other hand, the Hang Seng gained 0.21%; the KLSE Composite rose 0.23% and the Nikkei 225 surged 0.72%. At the time of writing, two of the three key markets in Europe were in the green and the US stock futures were trading in the positive.

Back home, foreign institutional investors were net buyers of stocks totalling Rs1,659.28 crore on Wednesday while domestic institutional investors were net sellers of shares aggregating Rs857.11 crore.

SKS Microfinance, the country’s only listed microfinance entity, today said it plans to raise around Rs200 crore through securitisation from two different banks. Under the pool securitisation, bundling micro loans made to borrowers like micro-entrepreneurs are sold to investors such as banks to raise funds. SKS Microfinance closed at Rs141 on the NSE, up 3.79% over its previous close.

Shasun Pharmaceuticals has concluded the sale of its Velachery property for a gross consideration of Rs29 crore. The company has taken this step pursuant to shareholders' approval in July 2011. The stock gained 1% to close at Rs86.25 on the NSE.

Ambuja Cements is likely to invest around Rs1,800 crore by December 2013 to expand its production capacity. It intends to fund the project through internal accruals, as it had surplus cash of Rs7,700 crore as of December last year. The stock lost 0.96% to close at Rs165.75 on the NSE.

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Personal Finance Exclusive
Will IRDA’s move on orphan policies really help customers?

IRDA should look at it from not just revival of lapsed policies, but from customer service angle

The Insurance Regulatory and Development Authority (IRDA) has recently issued an exposure draft on orphan life insurance policy. The guidelines allow 100% of renewal commission to allotted agent for revival of lapsed policy as well as future renewals. At present, a new agent is entitled to renewal commission of only 50% of what the procuring agent would have been entitled had the policy continued to be in force and that too if lapsed policies required medical examination.

The guidelines are good for life insurance agents who help in revival of lapsed policies which were sold by another agent. But the details are in the fine print. The renewal commission can be paid to the allotted agent only if the original agent who sold the policy is not entitled to the commission. This is a big if, as per insurance regulations.

Under Section 44, except on grounds of fraud, an agent who has served an insurance company for a period of five years shall be entitled, subject to certain conditions, to renewal commission on policies if s/he discontinues his agency. Agents who have completed 10 years of service with a given insurance company and stops for any reason his/her agency business but does not join another company are entitled to renewal commission on all such policies which they had placed. The agent’s heir will get it even after the agent dies. It is contract between an agent and the life insurance company as renewal commission is just deferred compensation which cannot be taken away if the agent has completed certain time with the insurance company. LIC continues to pay many former agents renewal commission even though they no longer continue in the business. In such cases, the lapsed policy even if revived by another agent will yield the allotted agent zero commission. It will go to the original policy seller or heir. Which agent would be interested in reviving policies in such cases?

According to IRDA guidelines, orphan policies are those that are “initially sold by an insurance agent whose services were subsequently terminated or removed from the rolls of the insurer excluding those policies to which the selling agent is entitled to renewal commission under provisions of Section 44 of the Insurance Act.” It means that the policy is not an orphan even if it is lapsed as long as the policy seller is entitled to renewal commission based on number of years with the insurer. In effect, IRDA’s initiative to have the insurance company allot lapsed policy to another agent and give the allotted agent the renewal commission is only applicable to the small subset of lapsed policies.

Addressing the issue of lapsed policies by incentivising agents is welcome step by IRDA, but who will help to revive the lapsed policies wherein the policy seller is still entitled to commission even though s/he is no longer with the insurer or may be even dead? If IRDA is looking to revive lapsed policies, it has to think of ground realities.

As a veteran life insurance agent asks: “Who will help such customers with services like loan processing, change of nomination or even filing to death claim? The agent who sold the policy is gone (left the insurer or dead) and there is no allotted agent to the policy for any kind of servicing. Life insurance companies keep renewal commissions when the policy seller is not entitled for renewal commission. It happens as many agents leave the business after one or two years. The insurer should use these funds to give incentive for agents to revive a lapsed policy even when the policy seller is entitled for the commission, but has left business after completing required years or dead.”

Insurance companies we spoke to have taken a different stand. According to them, “The policy seller does work to help in the renewal of policy even when s/he is no longer selling new policies. They are interested in continuation of renewal commission which can be substantial and hence they don’t want the policies to lapse.” If the agent has left business and is doing other things in life, how much time will that person have for servicing the sold policies?

IRDA also has put the onus on the insurance company to allocate the lapsed policies to another agent to helping policy revival. Till now, it was mostly initiated by the agent who would help revive lapsed policy sold by another agent and ask the insurance company for 50% of renewal commission. As per the draft, insurers shall take into account the track record of the agent and complaints registered against an agent while allotting the orphan policies. It is unclear what will be the process for insurance company to allot one agent over the other when many fit the same criteria. Whether the allotted agent is interested with renewal of the existing policy or to sell new policies to earn high upfront commission is another story.

IRDA has requested comments to the draft, but there is no email address which used to be given in other draft documents. It means there may be inconvenience in giving feedback. Comments if any on the above exposure draft may be forwarded to the following before 31 March 2012 - Joint Director (Life), Insurance Regulatory and Development Authority, 3rd Floor, Parisrama Bhavan, Basheerbagh, Hyderabad - 500004

While a life insurance agent can get renewal commission after leaving the business and even passing it to his/her heir, a general insurance agent does not get anything. Most of the general insurance policies are renewable every year and there is no concept of renewal commission payment if the agent has left business or dead. It’s something on the wish-list of general insurance agents.

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COMMENTS

D N RAO

5 years ago

Yesterday, i.e. 16/03/2012, I am helping a customer who is 64 years of age and lapsed his policy w.e.f 08/2007 due to negligence. The instalment premium per year is Rs.154=40 and sum assured of Rs.10,000/-. The policy was commenced on 28/08/1961. I was helping the customer without expecting anything from him. If IRDA provides credit of life and renewal commission to the agent who revives the policy is welcome step. Instead of going the renewal commission to LIC, it can be paid to the agent who has revived the policy. D.N.RAO, LIC Agent, Hyderabad

REPLY

suresh kumar gupta

In Reply to D N RAO 5 years ago

Good job D N RAO SAHIB
Pl help to resolve my illlegal termination issue from HDFC SLIC
SURESH KUMAR GUPTA
94141 07928

D N RAO

In Reply to suresh kumar gupta 5 years ago

Om ji,
Had you been associated with LIC, definitely I would have given advise to you. As each and every Life Insurance Company has its own terms and conditions in termination of Agents, pl. contact legal expert in insurance matters who can be of some helpful to you.

P M Ravindran

5 years ago

Of course the apex court had ruled that pension is deferred salary but commission on subsequent premiums even when the agent has not done anything is really too much! This fraud should stop forthwith. If this logic is accepted then marriage brokers may also start demanding commission for every year the marriage survives, or land brokers for every year the land remains with the same owner and so on!

REPLY

M Muralidharan

In Reply to P M Ravindran 5 years ago

Appears Sri. P M R does not have insight into an insurance agent's life, especially the ones who work among the lower income people. It is not easy in India to make someone to see merit in any type of insurance let alone life. It is even more difficult to make them stay committed for a long time except perhaps a minority.

P M Ravindran

In Reply to M Muralidharan 5 years ago

Mr Muraleedharan is very correct. I do not have too much of insight into an insurance agent's life but I do have enough 'outsight' as a subscriber to various polices, from mandatory vehicle insurance to household goods in transit to medical insurance and I can say if only a fraction of the enthusiasm shown by the agents while persuading one to subscribe to a policy is shown when the requirement comes to availing the promised benefits, these agents will never have to work the way Muralidharan claims they have to work to persuade somebody to subscribe. In fact I am right now drafting two complaints to the IRDA on behalf of a subscriber to two medical insurance policies and who has been afflicted with Glioblastoma Multiforme- a most vicious form of cancer of the brain!

R Nandy

In Reply to P M Ravindran 5 years ago

My understanding as a subscriber is that,the agent is given comission throughout the life of the policy so that he provides service to the subscriber as and when needed.In fact he should do most of the leg work in case of a claim.While buying a insurance this has to be kept in mind other than the insurance repudiation ratio of the insurer.If the agent doesent get comission during the life of the policy,there will be no ownership of the customer and he will have difficulty in getting service.

suresh kumar gupta

In Reply to P M Ravindran 5 years ago

a person want to like work hdfc do not want to co operate

C Jyoti

5 years ago

Lapsed policies are a very big source of income for the Insc. companies. Executives and employees vie with each other to get as many policies lapsed as possible. A reason why this happens so often, ant that too in the cases of lower income group people, is the lack of recognition in the LIC, in particular of the smaller agents, who really exert a lot of positive influence on the economically poorer classes as regards the importance of life insurance. These smaller agents actually must pay bribes to the top levels to retain their licenses.

REPLY

suresh kumar gupta

In Reply to C Jyoti 5 years ago

you are absolutly correct C.JYOTI i like to discuss my issue for hdfc slic pl give ur contact number my number 94141 07928

M Muralidharan

5 years ago

Sir,

This is a good idea. A simple way can be devised make a policy "orphaned". They can make the commission collecting agent or his/her nominee to submit every two/three years a form with updated address, phone number, nominee and ID of the policy holder with proof there off under policy holder signature together with current bank particulars. Failing which the policy can be declared as "orphaned" and allotted to another "deserving" agent for servicing. This will also enable the insurance companies to send the renewal reminders and survival benefits to the correct address etc.

suresh kumar gupta

5 years ago

thank u very much to IRDA, i am regulalry approch to HDFC SLIC To activate my licence to serve the better to my innocent cliernts but HDFC HAS NOT REPLIED ME

REPLY

Deepak R Khemani

In Reply to suresh kumar gupta 5 years ago

Have you tried approaching IRDA with your complaint

suresh kumar gupta

In Reply to Deepak R Khemani 5 years ago

hello Deepak ji
pl give me your mail id to approch for further or mobile numer my number 94141 07928

Deepak R Khemani

5 years ago

Finally something that makes sense from a regulator, but with the if's and but's mentioned in the article it remains to be seen who will like to takeover orphan policies if he/she gets nothing out of it, even now a lot of agents give service to clients wherein the previous agent has stopped giving service for whatever reason, in the hope of receiving future business from the client, a lot of Insurance agents have been providing FREE service to many an unknown client. Finally it is continuous good service which will provide sustainable business to the agent/advisor.

REPLY

suresh kumar gupta

In Reply to Deepak R Khemani 5 years ago

DEAR Deepak sir
HDFC has illlegaly terminate me and addament for my issue pl help to resolve the issue
I remain for your kind hellp

Deepak R Khemani

In Reply to suresh kumar gupta 5 years ago

Have you approached IRDA?

raj

In Reply to Deepak R Khemani 5 years ago

very true.

sanjay P doshi

In Reply to raj 5 years ago

not always true

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