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IRDA to meet finance ministry to discuss tax relief measures

IRDA chairman J Hari Narayan, “Certain tax measures will be beneficiary and will encourage the growth of insurance industry.”

September 25, 2012 4:48 IST | India Infoline News Service
The Insurance Regulatory and Development Authority (IRDA) will meet the finance ministry on Wednesday to discuss tax relief measures for the life insurance sector. The IRDA officials would meet finance minister P Chidambaram to consider their suggestions which will support the industry, according to media reports.

The IRDA has forwarded the industry’s views on the current tax structure for insurers and policyholders after detailed discussion with the insurers. IRDA has also given its views on tax and investment norms in insurance sector ahead of their meeting with the FinMin on Wednesday. IRDA chairman J Hari Narayan, “Certain tax measures will be beneficiary and will encourage the growth of insurance industry.”

The insurance regulator has suggested service tax relaxations for ULIPs (unit linked insurance plans) and traditional policies. Currently, the service tax applicable to ULIPs (including cess) is 12.36%, which is applied on charges and not the entire premium amount, while in traditional endowment plans, service tax (including cess) is 3.09% of the premium for the first year, and 1.545% of the premium from the second year onwards, the reports added.

The IRDA is proposing 1% of premium service tax for traditional plans and tax relaxations for ULIPs to restructure the entire product category. Also, the finance ministry is recommending the introduction of a separate tax exemption limit on life insurance policies. The finance ministry has made a proposal that pension products should be given separate tax exemption limit of Rs. 20,000.

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