Latest Expert Exchange Queries
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) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: VAT RATES :: cpt :: ACCOUNTING STANDARDS :: ACCOUNTING STANDARD :: list of goods taxed at 4% :: form 3cd :: empanelment :: TAX RATES - GOODS TAXABLE @ 4% :: articles on VAT and GST in India :: due date for vat payment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TDS :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: Central Excise rule to resale the machines to a new company
« Service Tax »
 Chidambaram says there cannot be multiple tax slabs in GST
 Service tax officials transferred for favouring realtor
 GST, a challenge and opportunity for accounting professionals’
 Service Tax On Hotels And Restaurants – Recent Delhi High Court Judgment
 GST Council discusses 4-tier tax rate, cess on demerit goods
 Why you shouldn’t miss these three simple tax saving options beyond Section 80C
 Determination of value for transactions between the Related parties under GST Laws.
 Higher collections can offset GST losses
 GST to subsume over a dozen Central, State taxes
 Incidence of indirect taxes won't go up under GST
 Advanced Budget date: Absence of a GST rate may present estimation challenges

Service tax hike makes life insurance plans costlier
June, 16th 2015

Service tax on life insurance plans has gone up with effect from June 1. The new service tax rate is 14 per cent (old rate 12.36 per cent) for term insurance and 3.50 per cent (old rate 3 per cent) for traditional plans in the first year and 1.75 per cent (old rate 1.50 per cent) in subsequent years.

The increase in service tax has raised the premium and will reduce the overall return on traditional plans. Traditional plans are a combination of insurance cover with a savings element coupled with tax benefit.

The entire debate after the Modi government completed one year was around growth and development, but nobody noticed that this minor change in tax rate could affect crores of insurance policyholders.

The service tax hike is a major blow to the common man, as it has not only increased insurance premiums but also raised mobile bills and cost of other services.

Until recently, the Indian insurance market was largely about traditional insurance plans. Previously only LIC was pushing these products, but private insurance firms have also been aggressively pushing these plans over the last few years.

Traditional plans are easy to sell, as they are not complex compared with unit-linked plans. Traditional insurance plans are not insurance plans in proper sense of the term, as they offer very limited sum assured against the premium paid. Nor are they investment products, as they are unlikely to beat inflation in terms of return. We need to agree that insurance distribution is agent-driven. Agents sell only those products where they earn more commission. Agents are promoting traditional plans heavily because they pay around 35 per cent commission in the first year and 5 per cent renewal commission thereafter as long as the premiums are paid. Irdai is silent and not taking any step to reduce the charges on traditional plans. These charges and the rising service tax will now make traditional life insurance plans investor-unfriendly.

The service tax journey started from 1 per cent and has now increased to 3.50 per cent in just four years. June onwards, one will have to pay more premiums because of the service tax hike. I strongly feel annual returns on traditional plans will come down to below 6 per cent per annum.

Now, it would be better to take a term plan and invest the balance in PPF, as this product also offers tax benefits and the maturity amount is tax-free. This combination of term plan and PPF can give at least 2 per cent more return compared with traditional plans.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Content Management System developers CMS developers Content Management Solutions CMS Solutions CMS India Content Management System India CMS development India Website CMS Website Content Management India Portal CMS India CMS Outsourcing CMS Vendor Complete CMS Custom CMS Services

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