SUBMITTED BY ; HARDEEP KAUR

M.B.A  4^TH SEM(A)

ROLL NO ; 1273544

Q25) COMMENT ON  TAXATION  PART  INSURANCE SECTOR.

INTRODUCTION; The Indian insurance sector is looking for remunerative tax incentives in Budget 2013-14 to boost sales volumes and increase penetration. While life insurers demand separate deduction limits for long-term insurance products, non-life insurers want special exemption categories for home and property insurance.

Amitabh Chaudhry, managing director and chief executive officer (CEO) of HDFC Life Insurance, said while the government was 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.
Life insurance policyholders can look forward to more tax concessions in Budget 2013 as the finance ministry is considering a proposal to do away with service tax on first premium and create separate exemption limit for pension schemes. Besides, the tax authorities are examining whether service tax may be assessed on realisation basis as against the current practice of levying duty on the premium on accrual basis. Corporate tax is currently governed by Section 44, along with rules contained in the First Schedule of the Income Tax Act, 1961. Accordingly, tax is calculated at 12.5 per cent basis actuarial valuation made in accordance with Insurance Act, 1938.

DISCUSSION;

The Central Board of Direct Taxes is also considering whether the total sum paid for post-retirement medical scheme could be made eligible of income tax deductions. Finance Minister P Chidambaram has been pitching for the need to push savings in financial instruments rather than in 'unproductive' assets like gold. The spurt in gold imports has aggravated the current account deficit.

Concerned over subdued growth in the insurance sector, Chidambaram had asked the insurance companies to refrain from mis-selling and devise simple products for people to boost growth in the sector. fe insurance policyholders can look forward to more tax concessions in Budget 2013 as the finance ministry is considering a proposal to do away with service tax on first premium and create separate exemption limit for pension schemes.
Industry has demanded that service tax liability should be on the basis of receipt of amount and subsequent conversion as premium.

REASIONS;

In my view, the reason why insurance is stumbling in India is because of mis-selling of products and complex products. If you want to sell insurance to India, you must sell simple products and must make it absolutely clear to agents and other officers that they should not mis-sell," Sources said the Income Tax Department is considering creating a separate exemption limit for some insurance pension products over and above the existing limit.
Industry has demanded that service tax liability should be on the basis of receipt of amount and subsequent conversion as premium.

CONCLUSION;

At present, service tax is paid on dues or receipt of amount, whichever is earlier. However, some of amounts due are never received, similarly amounts received in advance with proposal are not converted in Currently under the Income Tax Act, Rs 1,00,000 income tax deduction is allowed on the premium paid along with other approved investments.
        In my view, the reason why insurance is stumbling in India is because of mis-selling of products and complex p .Besides, the tax authorities are examining whether service tax may be assessed on realisation basis as against the current practice of levying duty on the premium on accrual basis.

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