Thursday, February 26, 2015
Union Budget 2015: Aegon Religare wants review of definition of tax on insurer
Current definition of tax on surplus was relevant when there were no private players. This needs to be reviewed, as was proposed in the draft Direct Tax Code
KS Gopalakrishnan AEGON Religare Life Insurance This budget is important for India. With a growing young population, it is important that enough jobs are created, skill sets are built to make these youngsters employable, take steps to improve agricultural production, infrastructure projects are encouraged, bold measures taken to improve health of Indians and finally create an inclusive growth. The external factors and internal mood are favourable to this Government.
Insurance serves a social need. It is a social pool wherein financial impact of risks are shared between people in the pool. Insurers administer the pool and charge every member - known as premium which includes the cost of the risk, administrative expenses and remuneration to the insurers. Levying a service tax on such premium is wrong. The government should remove the service tax.
Even after 15 years, there is no clarity on corporate tax on life insurers. Current definition of tax on surplus was relevant when there were no private players. This needs to be reviewed, as was proposed in the draft Direct Tax Code a few years back.
Insurance is a concept whereby the society shares the financial burden of certain risks. Whilst everyone has to have an insurance cover, individuals do not view buying insurance - particularly life and health insurance- as a priority and keep postponing until it is too late. It is therefore the responsibility of the government to provide incentives. One such incentive can be tax rebates - the government should create a separate category whereby insurance premiums qualify for separate income tax incentives.