Expectations from the New Government In India

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Expectations from the New Government In India
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• A new government with a clear majority has evoked
  lot of positive sentiment in the country in terms
  of the ability to take effective steps for growth
  and development. The mandate from the people of
  India has put the onus on the new government to
  bring in reforms for an economically prosperous
  country and reverse some of the negative economic
  trends such as slowing GDP growth and high
  inflation levels.
• life insurance, one of the most important
  segments of the financial services industry at
  large, though has contributed immensely to boost
  various sectors in the economy through its long
  term investments, supported significantly in the
  form of tax contributions, provided huge
  employment opportunities, is currently reeling
  under tough economic and regulatory pressure. The
  industry needs support from the Government of
  India, to help it in further contributing for
  nation building activities in the coming years.

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• As an immediate action, the new Government should
  address the following to boost growth in the life
  insurance industry
• A) Long Pending Insurance Bill
• With an absolute majority, the new government is
  expected to address the long pending Insurance
  Bill, which looks to raise the foreign direct
  investment (FDI) cap in the sector from the
  current 26 per cent to 49 per cent. FDI
  relaxation would encourage long-term fund inflow
  that would both encourage the growth of insurance
  in India as well as provide the government with
  access to funds to aid infrastructure growth.
  Moreover, insurance industry has seen negative
  job creation as number of agents and employees
  have been on the wane. FDI would get in greater
  investments into the sector and make it an
  attractive proposition for good talent.

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• B) Need for Rationalization of Tax laws
• Rationalization can be addressed by bringing in
  clarity and simplification in the tax laws,
  relooking into the current investment limits for
  tax rebates and certain current tax provisions.
• Direct Tax
• Relooking into the current investment limits for
  tax rebates and certain current tax provisions
• Life Insurance is a socio economic instrument. In
  absence of any strong social security system by
  the Government, at least the investment in India
  in Life Insurance premiums should be given
  additional limit of at least Rs. 1 lac in the
  current scenario, instead of clubbing the same
  with other investments u/s 80C of the Income tax
  Act, 1961.
• Also, investment in pension premium should be
  given separate deduction. Currently, such
  investments are clubbed with 80 C investments.

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• Currently an individual gets a deduction of
  Rs.15,000 for Health Insurance premiums paid
  (apart from a similar deduction on premiums paid
  on the lives of their parents). Growing inflation
  has increased the cost of medical treatments.
  This has made it necessary to take health
  insurance by every individual. In order to help
  the common man in meeting the increased medical
  costs, offering more tax incentives would be help
  in promoting health insurance and diluting the
  impact of inflation on medical treatments. The
  current limit of Rs.15,000 must be enhanced
  atleast to Rs.50,000
• Since life insurance companies have a long
  gestation period, the loss of initial assessment
  years is not available for set off against the
  profits of the future assessment years. Time
  limit under Section 72 should be relaxed for the
  life insurance industry and a longer period of at
  least 15 years should be available for carry
  forward.

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• Provisions that require clarity/simplification
• The Finance Act, 2013 has made an amendment to
  section 10(10D) of the Act to provide that a
  keyman insurance policy, which has been assigned
  to any person during its term, with or without
  consideration shall continue to be treated as a
  keyman insurance policy. Accordingly, maturity
  proceeds received under such a policy is not
  exempt under section 10(10D) of the Act. It may
  be noted that CBDT vide Circular no. 762 dated
  February 18, 1998 has clarified that the
  surrender value of the policy, endorsed in favour
  of the employee and in case of other persons
  having no employer-employee relationship, be
  treated as profits in lieu of salary or income
  from other sources respectively and to be taxed
  accordingly. The situation would trigger double
  taxation since the surrender value of the policy
  at the time of assignment would get taxed in the
  hands of the person in whose favour the policy
  has been assigned and further, the maturity
  proceeds will be also taxed as per the provisions
  of section 10(10D) of the Act.

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