The government is finalising a slew of tax concessions for life insurance policy holders including the possibility of additional tax breaks for pension schemes and removal of service tax on first-year premium payments.
The revenue department will examine whether, in addition to the National Pension Scheme (NPS), some pension products that insurance companies offer can be included in a separate limit over and above the Rs 100,000 limit allowed under section 80C of the Income Tax Act, finance minister P Chidambaram said on Monday.
Also, insurance firms will be allowed to invest in infrastructure projects that will enable companies to dig into household savings to raise resources for building expressways, ports and railways.
The finance minister said he has asked the Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC) to give their report on the changes in the tax structure for life insurance companies by October 10.
Chidambaram had recently discussed these measures in a meeting with chief executives of life insurance companies on September 4.
“A number of steps would be necessary and desirable to give a fillip to the life insurance industry and expand the spread and penetration of life insurance were agreed upon during the discussions,” said the finance minister.
The government is also examining whether social security insurance schemes such as Janashri Bima Yojana (JBY) and Aam Aadmi Bima Yojana (AABY), can be exempted from service tax, Chidambaram added.
The Central Board of Direct Taxes will examine whether income tax breaks can be given to contributions made to post-retirement medical scheme offered by insurance companies.
Besides, insurance companies will also not carry out additional “know-your-customer (KYC)” checks for persons who have bank accounts.
Banks will also be given the status of “brokers” mandated to sell products of more than one insurance company offering the customer a bouquet of policies as opposed to the current “one-bank-one-insurance company” policy.