Budget 2012: Government should prescribe a limit of Rs 1 lakh for life insurance premiums, says FICCI

FICCI in its pre-budget memorandum has asked the government to pass pending insurance legislation, which should help infuse long term funds for infrastructure development.

It has also made the following suggestions:

>> A separate limit of Rs 1 lakh be prescribed for life insurance premiums, as the overall limit is insignificant.

This additional deduction will increase insurance penetration in India, which currently is far behind compared to developed nations and would also help in balancing the virtual absence of social security norms.

The growth of life Insurance sector will bring the money back in the economy and will provide the necessary funds for the infrastructure growth, government funding, social security and overall development of the country.

>> Disallowance of 20% of CENVAT credit availed under Rule 6(3C) of the CENVAT Credit Rules, 2004 is not justified and hence should be removed.

>> The service tax is being currently charged on FMC, with taxable value being the higher of the maximum amount fixed by IRDA (1.35%) or the actual amount charged to the policyholders.

Depending upon the cost of managing the fund and nature of the fund (eg. liquid funds), the FMC charges deducted from the policyholders, at times, are lower than the cap prescribed by the IRDA.

Liability to deposit service tax should be on the actual FMC charged by the life insurance companies to the policyholders and not on the FMC cap prescribed by the IRDA.

http://articles.economictimes.indiatimes.com/2012-02-18/news/31074980_1_life-insurance-insurance-penetration-liquid-funds