Budget 2013: Provide explicit tax benefits to policyholders, says Sunil Sharma, Mahindra Old Mutual

The government should make provisions to provide incentives to the policyholders of life insurance in the form of explicit tax benefits in the Union Budget 2013, said Sunil Sharma, Chief Actuary at Kotak Mahindra Old Mutual Life Insurance, in an interaction.

Sunil Sharma added that insurance fund provides significant long term contribution to the infrastructure funding of the country via investment in government securities and other borrowing raised by the government from time to time. Therefore, the government must make room for explicit tax benefits to policyholders.

Providing explicit tax exemptions to policyholders will help generate demand for insurance, increase protection to population and eventually contribute to the overall economic growth of the country, added Sharma.

In order to promote long term savings for retirement, pension contribution from individuals should have a separate exemption limit of about Rs 50,000 per annum.

Furthermore, the required condition of capital assured to be higher than 10 times the premium for maturity proceeds to be tax free should be reduced to 5 times the premium, said Sharma. This will help policyholders of higher age to save in a tax efficient manner.

Lastly, he added that life insurance is very capital intensive business and a preferred tax treatment should also to be provided to the insurer under DTC.