Life insurers have called for a level-playing field vis-a-vis mutual funds and said the government should levy service tax only on fund management charges under unit-linked insurance products (ULIP).
Service tax on mutual funds is levied only on fund management charges, while life insurers have to pay service tax on various charges such as fund management, administration charges and premium allocation fee, among others under ULIPs.
"Today service tax is applicable on all charges under ULIPs. It should only be on fund management charges," Tata AIG Life Insurance Chief Financial Officer Vivek Sood said, adding that he hoped the forthcoming Budget would address this issue.
Service tax on ULIPs should be brought in line with mutual fund products, he said.
Sharing similar views, IDBI Fortis Life Insurance Chief Executive Officer and Managing Director Nageswara Rao said: "Service tax on ULIPs should be applicable only on fund management charges and not on all the charges. This will help cut the cost of ULIPs."
Life Insurance Council Chairman S B Mathur also demanded parity between ULIPs and mutual fund products, besides seeking a separate slot for deductions under Section 80 C for long-term saving products like insurance and pensions.
Currently, deduction under Section 80 C also includes short-term saving instruments like mutual funds (ELSS).
"The government should consider increasing the limit under Section 80 C for life insurance and pension products as tax benefit is the key driver to buy insurance products and also helps in increasing penetration," Rao said.
The insurers have sought an extension of limit to carry forward losses from 8 years to 10 years.
"Losses should be allowed to be carried forward to 10 years from the current 8 years," Mathur said.
General insurers, in their budget wish-list, called for clarity on taxation on investment income.
"Clarity on how investment income and unrealised gains are to be taxed will go a long way towards fostering sustainable growth and development," ICICI Lombard General Insurance CEO and Managing Director Bhargav Dasgupta said.
An extension of tax-breaks would also help the industry, he said.
Bajaj Allianz General Insurance Chief Financial Officer S Sreenivasan said: "The rate of tax must not be more than the MAT rate of 15 per cent."
General insurers get no tax holidays, exemptions or any benefits, he said, adding they have to pay tax on book profits and, from April 1, 2010, would also have to pay taxes on capital market gains as well.
