Private insurers, aggressively spending on distribution to boost their current 45 per cent market share against entrenched state giant LIC, are seeking more elbow room from the government to cushion losses while expanding.
These companies have asked the Finance Ministry to extend the period of carrying forward losses from the current 8 years to 12 years. The life insurance business was privatised in 2000-01. Since then, only SBI Life insurance has broken even.
Section 88 of the Income Tax Act permits any company to carry-forward its accumulated losses for 8 years. If the company records profits in the ninth year, the profit is taxed after the accumulated loss registered in its first year of launch is set off. If it continues to report losses after eight years, the losses are considered as lapsed for tax calculations.
The Life Insurance Council, a self-regulatory body of life insurers, has written to the ministry stating that since the gestation period of life insurance business is 7 to 10 years, losses should be allowed to be carried forward for 12 years.