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Budget should address Non-life Insurance sector

Last updated on: February 24, 2011 17:02 IST

The Budget 2011-12 is going to be presented by the Finance Minister on February 28, 2011. Our pre-Budget views are:

With implementation of Direct Tax Code from financial year 2012-13, almost certain, the Finance Minister is not likely to tinker with the tax structure except some minor changes.

Therefore, there is unlikely to be any relief on corporate tax rate structure, though minor upward revision is expected in personal income tax exemption limit to absorb the impact of inflation.

It is also likely that the Minimum Alternative Tax rate may be increased to 20 per cent.

However, with the 3G spectrum windfall out of the way in the next financial year, the Minister may be looking for some other sources of revenue to cover the gap.

There is already an indication that with the economic growth right on track, the stimulus package given earlier to stem the deceleration in economy may be rolled back with 2 per cent increase in Value Added Tax and Service Tax.

However, rising crude oil prices and high inflation may force the Minister to curtail excise duty on petroleum products to keep petrol and diesel prices in check or increase subsidy to oil companies.

With limited upside in revenue, the focus will be more on controlling expenditure side.

However, with elections in certain states expected soon, it will be hard task to curtail the Budget for populist schemes and controlling fiscal deficit will be a daunting task for the Minister.

Under the prevailing conditions, no major relief is expected from this Budget for both corporate and individual tax payers.

As far as the insurance sector is concerned, we expect the Budget to address the following issues affecting the Non-life Insurance sector:

a. We want Non-Life Insurance sector to be allowed exemption on long-term capital gains arising from sale of investment in equity inline with the exemption allowed to other sectors.

b. Remittance made to foreign Reinsurers under Reinsurance arrangements should be kept out the scope of section 195 of the Income Tax Act for deduction of TDS.

c. The limit for rebate for mediclaim premium under section 80D should be increased from Rs. 15000 to Rs. 25000 for individuals to provide boost to the health insurance.

This will also allow people to opt for higher coverage to cover higher medical cost.

d. Minimum exemption limit for service tax should be increased from present Rs. 50 to Rs. 1000, as there is hardly any policy carrying premium of less than Rs. 50

R.K. Kaul, Chairman-cum-Managing Director, The Oriental Insurance Co. Ltd
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