Life insurers voicing to raise exemption limit to 1.5 lakh

By SiliconIndia   |   Friday, June 26, 2009   |    1 Comments
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Bangalore: Life insurers are voicing for increased exemption on investments in long term policies. They have asked the government to consider raising the exemption limit to around Rs. 1.5 lakh from Rs one lakh at present. SB Mathur, Secretary General, Life Insurance Council said, "We want the government to increase the limit from Rs.1 lakh to around Rs.1.40-1.50 lakh, since investments in housing, education and mutual funds also qualify under the same limit. People will not like to invest in long-term plans when they get a similar exemption on a short-term policy." Insurers have suggested the government to charge service tax only on fund management charge of unit-linked products. At present, insurers pay tax on allocation as well as on stamp duty charges, including the fund management charge. Mutual funds pay service tax only on fund management charge. As Mutual funds removed entry load, the commission that an investor has to pay while purchasing units of a mutual fund last week last week, insurers could never have a zero entry load. Mathur says, "According to the Insurance Act 1938, insurers have to pay 40 paisa on every Rs.1,000 of income to state governments under stamp duty." Insurers feel that there is a huge disparity between the life insurance industry and the mutual fund industry. Insurers pay charges on risk premium, commission to agents and fund management charges, whereas mutual funds only pay fund management charges. US Roy, Managing Director and CEO, SBI Life says, "As the government has allowed exempted income tax on investment in five-year fixed deposits, it should incentivize people to invest in long-term policies. We want the government to look at the tax levied on various charges on a life policy in a more rational manner."
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