New Delhi: Key recommendations that one would like to make to the Finance Minister to factor in the concerns of the life insurance industry are:
• Encourage Pension: It is important to address the need to significantly enhance the tax benefit available under Section 80 CCC (i) for investments made in pension. At present, the deduction for Sec 80CCC for pension schemes has been clubbed with in the overall limit of Rs1,00,000 for Section 80C.
Rajesh Relanm managing director, MetLife India Insurance
Section 80CCC should be made independent of Section 80C, since pension addresses a special need — the provision for post retirement income and it cannot be compared with the other tax saving instruments which are general in nature.
Thanks to the advancement in medical research, the longevity of the population has increased and hence the need to provide for old age. Tax incentives still continue to be the driver for investment in pension schemes. Contribution to pension funds are on an EET model and this is not attractive from the investors’ point of view when they can invest the same Rs100,000 in other savings which are under the EEE model.
• Encourage long-term savings: In a country that lacks social security systems, life insurance offers a credible security net and hence it needs to be encouraged. Life insurance schemes are long-term in nature and need to be differentiated from other types of savings.
The limits available for savings need to be enhanced from the current level of Rs100,000 for all savings put together. There should be a separate limit for Life insurance premiums – they being long term in nature.
• Impact of the EET on life insurance policies: The contemplated Exempt-Exempt-Tax (EET) tax regime will be discriminatory against the life insurance sector as it would result in taxability of returns under life insurance policies.
In India, life insurance is still bought for tax saving purpose. Given the fact that people in India are grossly underinsured, there should be a base incentive for everybody to get insured and an additional incentive for taxpayers. Moreover, the tax regimen should remain consistent.
Rajesh Relan is managing director, MetLife India Insurance Company Limited