Centre urged to withdraw service tax on life insurance premium
February, 18th 2016
The Insurance Employees Union of Belagavi division has urged the Union government to withdraw service tax on life insurance premium, provide exclusive income tax rebate under Section 80 C of the Income Tax Act and extend tax benefit for short-duration policy contracts.
In a memorandum presented to the Union Finance Minister through Suresh C. Angadi, MP, here on Wednesday, union president G.V. Kulkarni and general secretary P.A. Joseph said that the service tax on the risk portion of the life insurance premium was acting as a disincentive now, as evidently seen in the huge drop in the sale of single premium policies.
It was unfair to levy a tax when a person bought a policy to cover the risk on his life to give a sense of security to the family, they said.
Moreover, the tax mobilised was very small compared to the total tax revenues generated by the government and withdrawal of this tax should not be difficult, they said.
At present, life insurance savings were clubbed with other modes of savings for the purpose of tax rebate under Section 80 C of the Act.
Considering the unique nature of savings in life insurance, life insurance premium needed to be treated in a special manner. The government could provide exclusive tax rebate in life insurance savings for at least an amount of Rs. 2 lakh.
The policies for a shorter duration were now treated on Exempt, Exempt and Tax (EET) basis, due to which such savings were shifting towards physical assets. This was not beneficial either to the economy or the industry. Therefore, all life insurance policies irrespective of the duration of the contract must be given the benefit on Exempt Exempt Exempt (EEE) basis.
“We strongly feel that life insurance needs to be given a special treatment compared to other modes of savings considering the fact that the funds mobilised under this can be deployed in long-term infrastructure requirements of the country,” Mr. Kulkarni said.