The Insurance Regulatory and Development Authority (IRDA) would be approaching the finance ministry on Wednesday to allow investments made by individuals in pension products to be allowed for tax exemption.
IRDA ChairmanJ Hari Narayan said at an insurance summit, "there are a list of issues, which will be discussed in another meeting with the Finance Minister on Wednesday, like income tax, service tax. We believe that certain tax measures will be helpful for the growth of the industry," he said.
The tax measures include extending the tax exemption limit by Rs 20,000 beyond the existing limit of Rs one lakh, just like the additional exemption limit available for investment in infrastructure bonds.
At present, the Rs 20,000 limit for investment in infrastructure bonds is in addition to the Rs 1 lakh tax deduction limit available under Section 80C. The insurers have requested IRDA for a similar exemption for the pension products, which the regulator will take it up to the finance ministry.
``The regulator is proposing service tax relief measures to the ministry on traditional plans. Currently, the service tax for traditional plans stands at 3.09 per cent in the first year and from second year onwards, the policy holder needs to pay 1.6 per cent. We are proposing the ministry to bring it down to 1 per cent and also the taxes on Unit-linked insurance plans (Ulips) are at 12.36 per cent. Relaxation on this would bring stimulus to this product category,’’ said Sudhin Roy Chowdhury, Member (Life), Irda.
Hari Narayan also stressed on rationalisation in commission structure, saying that management cost should be reduced.
(Edited by Prem Udayabhanu)