Expressing concern over the numerous problems faced by the life insurance market, Rajesh Sud, CEO and Managing Director, Max Life Insurance has emphasised the need for budget 2013 to make this industry attractive for both policyholders and shareholders.
Explaining that corporate tax is currently governed by Section 44 along with rules contained in the First Schedule of Income Tax Act, 1961, Sud said that the levy of taxes reduces the value of money for policyholders. “Tax is calculated at 12.5% basis Actuarial Valuation made in accordance with Insurance Act, 1938. This levy of taxes, directly or indirectly, on amount to be received along with effect of inflation considerably reduces the value of money for policyholders,” Sud says.
He recommends that the tax should be calculated on the basis of profits disclosed in shareholders account at 12.5% prepared as per IRDA. On the issue of indirect tax, Sud has said that service tax on new Business (Other than Single Premium) /Renewals should be at 1%. This will bring parity with other financial products like fixed Deposits and mutual funds.
Presently, service tax is paid on due or receipt of amount whichever is earlier. However, some of amounts due are never received; similarly amounts received in advance with proposal are not converted into policy. “Considering the nature of life Insurance, service tax liability should be on the basis of receipt of amount and subsequent conversion as premium,” he adds.