Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: list of goods taxed at 4% :: TDS :: VAT RATES :: cpt :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARD :: VAT Audit :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS :: empanelment :: form 3cd :: due date for vat payment :: articles on VAT and GST in India
 
 
« General »
 Banking transaction tax to have cascading effect: NIPFP
 While filing tax in India, NRIs do not have to state overseas income
 Tax ease on cards, some daily use items may become cheaper
 It’s one year of GSTN, too
 SBI home, auto loan interest rates cut, set to be effective from Nov 1
 MNCs will have to furnish extra disclosures from March 2018
 High Court Allows Woman To File Income Tax Returns Without Quoting Aadhaar
 If tax status is no longer NRI, all your income is taxable in India
 Tax Benefits from Different Types of Loans under the Income Tax Act, 1961
 Do you have any question about tax filings? Now, chat online with income tax experts to clear your doubts
 DHFL loan to Manpreet Estates under tax scan

Need to reconsider taxation of life insurance savings
December, 07th 2010

The new Direct Taxes Code (DTC) Bill, which was introduced in Parliament by the finance minister in the last Budget and has since been referred to the standing committee for detailed examination, has introduced far-reaching changes in the taxation of life insurance savings in the hands of policyholders. The new provisions make a complete departure from the age-old practice of treating all long-term savings on a par and incentivizing these, a practice which was further strengthened in the first draft of the DTC released by the Central Board of Direct Taxes (CBDT) in 2009.

The proposed Bill provides total exemption up to Rs. 1 lakh for investments in long-term savings such as employees provident fund (EPF), Public Provident Fund (PPF) and New Pension System (NPS). No minimum holding period is prescribed for investments in these schemes. A separate window of a much lower amountRs. 50,000has been prescribed for health insurance premiums (section 80D under the present Act), educational expenses and life insurance premiums.

With increasing cost of education and healthcare, most of this small limit would be utilized and would leave very little space for life insurance premium. The average maturity for life insurance policies is 15 years or more and is increasing steadily. Pension policies taken through life companies have even higher holding periods with an average term of 30-40 years before and after investing.

Yet these savings will not be eligible for tax incentives despite the fact that there is a minimum lock-in period of five years. Other long-term savings such as EPF, PPF and NPS with a shorter lock-in or no lock-in period will be eligible for tax incentives with higher qualifying limits. The original draft provided for a common limit of Rs. 3 lakh for all these long-term savings, including life insurance.

No rationale or logic has been given for this discrimination. One does get a feeling that the thinkers in the tax planning divisions feel that long-term savings through life insurance is less important for the economy and needs to be discouraged, while savings through EPF, PPF and NPS are sacrosanct and need to be incentivized through fiscal incentives.

It could also be the result of mistaken belief that long-term savings through life insurance are investments, a dirty word, and should be treated inferior to other long-term savings that are holy cows and need to be given tax incentives.

The proposed treatment of life insurance savings in the draft Bill totally disregards the important contribution made by the life insurance industry in providing long-term funds to the government and contributing to the development of infrastructure.

At least Rs. 7 trillion of life insurance funds are invested in government securities and around Rs. 1.5 trillion in infrastructure alone. During the financial turmoil of 2008-09, when foreign institutional investors withdrew Rs. 47,000 crore from the equity markets, life insurance provided some stability to the market by net buying of equities amounting to Rs. 51,000 crore.

Imagine the plight of the markets if the life insurance industry had not helped in arresting the downside. Moreover, apart from post offices, life insurance is a major sector aggregating the savings in the rural sector with mandatory 18% policies required to be sold in rural areas. The revenue department in the ministry needs to do some serious rethinking and ensure that life insurance premiums are given the same treatment as other long-term savings.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Article Management Solutions System Article Management Software S

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions