Service tax on first year insurance premium may soon be waived-off
Aiming to encourage people to buy insurance policies, union finance minister Mr. P Chidambaram recently, announced that the government is considering removing service tax on first year insurance premium payments. Due to which, the premium for the first year may get cheaper by 3%.
At present, a life insurance policyholder pays 3% service tax on insurance premiums.
Mr. Nageswara Rao, MD & CEO, IDBI Federal Life Insurance said, “If the service tax is removed, the benefit will be directly passed on to customers, making premiums cheaper for new customers.”
“Any reduction in cost will benefit the sector and will help companies to attract new customers,” he added.
Due to volatile market and slowing economy, insurance industry has been facing slow growth. First-year premium collections of 24 insurance companies fell 9% to Rs 114,233 crore in fiscal 2011-12 against Rs. 125,826 crore in the previous fiscal.
The Managing Director and Chief Executive Officer of Future Generali India Life Insurance, Mr. Deepak Sood said, “Removal or reduction in service tax would encourage people to buy insurance policies because they will be able to get more insurance cover with the same amount of money. In India, buying of insurance policies is not in the priority list of individuals. Customers need to be encouraged by such steps.”
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