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Amitabh Chaudhry, MD & CEO, HDFC Life Insurance said that while the government aiming to shift savings from real asset classes such as gold to financial asset classes, the budget would provide an opportunity to introduce some long standing demands of the life insurance industry.
T R Ramachandran, CEO & MD, Aviva Life Insurance said that separate sub-limit for long-term savings like insurance is the most crucial recommendation which has been raised over the years is around tax incentives for customers to spur demand for life insurance products. "Currently the deduction under Section 80C is a combined limit shared with other investment products including provident fund contributions, savings certificates, bank tax saver deposits, and insurance and life insurance premiums. Hence, the government should look at encouraging people to save for long-term by providing a separate sub-limit of Rs 1 lakh for long-term savings," he said.
In the last budget, the finance minister had said that tax deduction would be given to policies with sum assured being ten times of premium. Ramachandran said that this is a distortion as compared to competing products like bank deposits & mutual funds where the deduction is based on tenure of the product. "Also this is detrimental for older people seeking life cover as it impacts their premium adversely. We have requested the FM to apply the same criteria to insurance products to enable it to attract long term savings," he added.
Sandeep Ghosh, MD & CEO, Bharti AXA Life Insurance opined that offering a carved out limit purely for insurance only, will promote life insurance products.
Apart from individuals, insurers said that budget should make the industry attractive for shareholders too. Rajesh Sud, CEO and MD, Max Life Insurance said, "Corporate tax is currently governed by Section 44 along with rules contained in the First Schedule of Income Tax Act, 1961. Accordingly, tax is calculated at 12.5% basis Actuarial Valuation made in accordance with Insurance Act, 1938. This levy of taxes, directly or indirectly, on amount to be received along with effect of inflation considerably reduces the value of money for policyholders. We propose Corporate tax be calculated basis profits disclosed in Shareholders Account at 12.5 per cent prepared as per Insurance Regulatory and Development Authority."
On the general insurance front, insurers have demanded special exemptions for categories like home insurance and personal accident.
Bhargav Dasgupta, MD & CEO, ICICI Lombard General Insurance said that their expectation from the budget included increasing the section 80D exemption limit for health insurance as well as bringing segments like home, personal accident and travel insurance within the ambit of the tax exemption clause. "This should encourage more customers to avail such products, enabling them to transfer unforeseen risks at a minimal cost," he said.
Taxation of reinsurance premiums has also been a pressing issue for insurers. Amarnath Ananthanarayanan, CEO & MD, Bharti AXA General Insurance said that the reinsurance premium paid to the non-resident reinsurers is chargeable to tax under Section 5(2)(b) of the Income Tax Act 1961. "The reinsurance is an alternative capital to the insurance industry and as per Uniform Model Convention, reinsurance premium is exempt from taxation. As per Article 7 of Double Taxation Avoidance Agreement (DTAA), all the agreements provide that income arising due to a non-resident enterprise from doing business in India shall not be taxed in India unless the non-resident enterprise has a permanent establishment in India. Accordingly, neither the overseas reinsurer by itself nor because of its presence in India through a broker constitutes a permanent establishment in India in the absence of physical presence. Therefore, the reinsurance should be excluded from the definition," he said.
The non-life insurers have asked for the budgetary provisions to treat both life and non-life players on an equal footing. Industry players said that Minimum Alternative Tax (MAT) is not applicable to life insurance companies whereas general insurance companies are subject to MAT. Therefore, they have asked for removal of MAT for general insurance companies. Further, they have also asked for equal treatment with life insurers with respect to taxation of capital gains.
Foreign Direct Investment (FDI), too, has been an issue of concern, both for life and non-life insurers. Ramachandran said fresh FDI is required to fuel this and to ensure that customers in India get access to world-class products, which the foreign partners bring into India. "Delay in enabling this has clouded further investments in the sector. We are hoping that all political parties will look at the FDI limit in an overall perspective and encourage the growth of the insurance industry in the country," he added.
Echoing a similar view, KK Mishra, CEO, Tata AIG General Insurance said that he hoped for greater clarity to be gained on FDI norms in the insurance sector, adding that this would benefit the insurance sector as whole right from product innovation, distribution and to robust customer service. He also called for insurance premium for covering small and medium enterprise risks to be exempted from service tax. "For other insurance products, perhaps a reduction in the service tax of 3-4 per cent could be considered," he said.
