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: ACCOUNTING STANDARD :: articles on VAT and GST in India :: Central Excise rule to resale the machines to a new company :: empanelment :: VAT Audit :: list of goods taxed at 4% :: ACCOUNTING STANDARDS :: cpt :: TDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT RATES :: due date for vat payment :: TAX RATES - GOODS TAXABLE @ 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd
 
 
Service Tax »
 A 5-Point Guide For Buyers To Understand The Effect Of GST On Real Estate
 Stalled unsorted diamond imports to resume after GST rate revision
 TDS, TCS deductors can apply for GST registration from 18 September
 E-commerce companies face tax heat as I-T department says discounts should be treated as capital spend
 Central Goods and Services Tax (Sixth Amendment) Rules, 2017
 GST will also impact direct tax collection
 Seeks to extend time period for filing of details in FORM GSTR-6 for months of July & August
 GST: Is input tax credit available for tax paid on mobiles given to staff?
 GST filing, reconciliation solution launched
  Finance Ministry asks taxmen to submit note on high-pitched assessments
 Step by Step Guide for GST Enrolment for existing Central Excise / Service Tax Assessees

Ulips: tax up, returns down
June, 09th 2008

The biggest propeller of this growth has been the unit-linked insurance plans (Ulips) which have, according to some estimates, accounted for nearly 90% of the new business being generated by life insurers

Undoubtedly, the life insurance industry has been growing at a steady pace over the last few years. A low 2.6% contribution to the GDP figure in 2006 it rose to 3.26% and 4.09% in 2006 and 2007, respectively. The biggest propeller of this growth has been the unit-linked insurance plans (Ulips) which have, according to some estimates, accounted for nearly 90% of the new business being generated by life insurers.

The new edict:The finance Bill 2008-09 has brought the management of Ulips of life insurance companies under the service tax net. The mortality portion of the premium was already being taxed. The direct impact of this, however minimal, would be on the fund value of the policyholder.

What gets taxed: The charge is on the service provided by the insurer to the policyholder. The amount charged for levy of service tax will be the difference between the premium paid and the investible amount segregated for actual investment (including the mortality). For example, on a premium of Rs100, if the mortality charged is Rs10 and the investible amount is Rs85, then the service tax is to be charged on Rs5, that is 100- 95 (10+85).

In simple words, the service tax of 12.36% on Ulips is going to be charged on the entire amount that the insurer keeps after deduction of mortality charges and the investible amount. Much of it is reflected in the front-end premium allocation charge. So, the higher the charge, the higher the impact. Nitin Chopra, CEO, Bharti AXA Life Insurance Co. Ltd, says: By placing the allocation charges of Ulips under the service tax fold, while the entry load of other market-led instruments are not, Ulips are not being provided a level playing field.

Elsewhere: In mutual funds, the service tax is charged only on the asset management charge. This fee is only a part of the recurring charges that the fund house can charge based on the size of the corpus. Usually, it is 2.25% of the corpus. The asset management charge is part of this and capped at 1%.

Anil Sahgal, director of strategy and chief investment officer, Aviva Life Insurance, says: The intent of the Budget speech was to bring equity between mutual funds and Ulips which, perhaps, is not the case according to the illustration given in the Finance Bill.

Further, the industry feels the tax will hurt insurance penetration in India. Chopra says: Indian customers prefer investment-cum-insurance plans. Ulips, as a category, promote the value-added benefit of market-led investment. Hence, Ulips need to be supported on the tax front to improve insurance penetration in India.

The impact: The service tax will lower the returns for a Ulip holder. Says V. Srinivasan, chief financial officer, Bharti AXA Life: Our analysis indicates that the internal rate of return (IRR) to customers on our products will reduce by 20-40 basis points per annum over a 15-year holding period, on account of this service tax. This would hold true for most other insurers as well. Shikha Sharma, CEO and managing director, ICICI Prudential Life Insurance, says: The service tax, perhaps the net of input credit on service tax available to the life insurance company, will likely be passed on to the consumer. As such, there will be no change in the expense ratio of the life insurance company.

What to do: As various components of the premium of a Ulip are under the service tax net, the overall tax incidence for customers has gone up.

Look for plans that have a low upfront premium allocation charge. However, that does not mean that overall returns would be higher as insurers might resort to higher policy administration and fund management charges. A better way to view the cost-adjusted returns of any Ulip of any insurer is to get hold of the net yield figure.

Will gold get back its shine?

The poor demand for gold witnessed over the last seven months is expected to turn now. As gold prices soared since September 2007, retail buyers kept out of the market. With festivals around the corner and expectations of a good monsoon, experts believe that demand for gold is set to pick up this year. Prices have now fallen 15% from its record highs and this will lead to a spurt in demand, say analysts.

Record prices had cooled the demand in India and imports had fallen by 30% in the three months ended 31 March. Gold exports in March were less than half that of the previous year. Gold buyers preferred to sell old jewellery and buy new ones instead of paying cash for gold. A recovery in demand in India may help push up global prices that have declined to less than
Rs11,370 per 10g for the first time in more than three months

Gold is quoting at Rs11,963 per 10g in the spot market currently. Any significant drop in prices, however, is not immediately expected as oil prices and inflation continue to soar. Most analysts predict an average of Rs11,000 per gram for gold for this calendar year.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Privacy Policy

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