The life insurance industry, including 23 life insurers and Life Insurance Corporation, has sought further tax exemption for the industry in the maiden Union Budget to be presented by Finance Minister Nirmala Sitharaman on July 5.
They want parity to be given to the life insurers vis-a vis the National Pension Scheme (NPS) scheme which has been allowed tax exemption of an additional amount of Rs 50,000. The additional deduction of Rs 50,000 allowed for investment in NPS is over and above the limit of Rs 1.5 lakh since Budget 2015.
“Separate deduction of Rs 50,000 should be allowed in the case of life insurance products as life insurance companies provide products which cover life cover as well as long-term savings,’’ said V Manickam, Secretary General, Life Insurance Council.
Deduction demand as firms give life cover with long-term savings
Life insurance players are seeking parity vis-a-vis the National Pension Scheme (NPS) scheme, which has been allowed tax exemption of an additional amount of Rs 50,000 over and above the limit of Rs 1.5 lakh. Life insurance players are seeking separate deduction of Rs 50,000 for their products as they provide products that extend life cover as well as long-term savings.
For life policies, deduction is allowed only up to a maximum of Rs 1.5 lakh.
Life insurers also want the principal amount in an annuity to be given tax exemption. Currently, the entire amount including principal and interest are getting taxed.
“Like a housing loan in which the principal amount enjoys the tax benefit, in the annuity also, principal should be allowed tax benefit. An EMI like formulae should be considered to compute the income component of each payout,’’ said Manickam.
“Parity should be given vis-a-vis interest deduction in the case of senior citizen. Deduction of Rs 50,000 should be granted in the case of accretion income earned under annuity pension products of life insurers,” insurance officials said.