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Insurance sector hopes for relook at DTC proposal, FDI ceiling
March, 14th 2012

The insurance industry's expectations from this year's Budget include an overall re-look at the proposals of the Direct Tax Code, waiver of service tax and an increase in the ceiling on foreign direct investment.

Although implementation of the DTC has been deferred for a year, the fear is that some of its proposals may be included in this year's Budget.

According to Mr Amitabh Chaudhry, Managing Director and CEO, HDFC Life, most of the DTC recommendations are negative for the insurance industry. So the real concern is that the Budget may pick up elements of the DTC and implement them.

However, with the Standing Committee on Finance recommending that sum assured should be 10 times the annual premium (instead of 20 times as recommended by the DTC), companies are hopeful that at least this will be implemented.

Another DTC proposal, to tax customers on maturity of the policy or EET (Exempt Exempt Tax) method would also have an adverse impact on the life insurance industry, said Mr V. Srinivasan, Chief Financial Officer, Bharti AXA Life Insurance.

The demand, therefore, is to retain EEE so that the final return in the hands of policyholders at the time of maturity is not taxed.

Companies would also like to see a separate tax exemption limit of Rs 2 lakh for long-term saving instruments such as life insurance This will promote long term savings habit among investors,'' said Mr Rajesh Sud, CEO and MD, Max New York Life Insurance.

A long pending demand is raising the ceiling on FDI in insurance to 49 per cent. Many insurance companies would like to invite foreign partners to raise their stake. Raising the cap to 49 per cent will provide enough incentive to foreign companies to invest in Indian insurance sector. This will attract required capital in the industry and help the sector expand much faster,'' said Dr. Damien Marmion, Chief Executive, Max Bupa Health Insurance.

 
 
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