New Delhi: The industry is more than 100 years old in India and is the largest mobilizer of savings after the banking sector. The Indian life insurance industry, which constitutes as much as 15% of gross domestic savings, manages assets worth more than Rs7,00,000 crore or $175 billion.
The Life Insurance council, the representative body of life insurance business in India, also says the industry directly employs about 200,000 people, and has an agency force of 1.5 million.
In its pre-Budget memorandum submitted to the Finance Ministry, the Council has sought a number of changes in direct and indirect tax laws applicable to the industry itself and to the citizenry, which constitutes the bulk of its customer base.
One of the key demands for the industry itself is the introduction of a provision to allow set-off and carry-forward of losses for a period of 12 years for the life insurance industry. Currently, the period applicable across sectors under the Income Tax Act is eight years.
The Council justifies this demand, stating in its memorandum that the business has a long gestation period and the average break-even period would vary between 10 and 12 years.
The Council is also ofthe opinion that the present exemption limit of Rs15,000 under Section 80D is inadequate and needs to be doubled. For senior citizens, the limit should be raised from the present Rs20,000 to Rs35,000. Section 80D offers relief for medical insurance premium paid.
The Council also wants the Finance Minister to extend the benefit of service tax exemption below the limit of Rs8 lakh in a year to all service providers such as insurance agents.
Currently, while the Rs8 lakh threshold applies to all service providers, insurance companies are expected to pay service tax on behalf of their agents, irrespective of the level of their income in a year. So while the agent is technically not liable to pay service tax if he earns less than Rs8 lakh a year, the tax nevertheless reaches the exchequer because it is the insurance company which pays it.
The Council’s sentiments on this issue are echoed by Bert Paterson, managing director, Aviva India.
Other recommendations of the Council have also been expressed by other contributors such as Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance Co. and Rajesh Relan, MD, Metlife India Insurance.
In the general insurance space, Ajay Bimbhet, managing director, Royal Sundaram Alliance Insurance Co. Ltd, has made recommendations that would have a bearing on his industry.