Life insurers, as part of their budget wishlist, have proposed allowing them to float ULIP infrastructure bonds to raise long-term resources for the core sector. Life insurers have sought relief for such unit-linked insurance schemes that are in the nature of a bond and invested in the core sector. The industry’s reasoning is that customers are on the look out for long-term investments and life insurers can provide them this option.
Some other items in the wishlist include allowing them to carry forward losses for 12 years and new tax breaks for policyholders.
The Life Insurance Council, the representative body of life insurers in India, in its memorandum to the Finance ministry, has sought the introduction of a separate limit of Rs. 1 lakh per year of income tax exemptions for long-term financial savings instruments under section 80C of the Income Tax Act. The council’s argument is that existing provisions allow Section 80C tax deduction for instruments made in short-term savings instruments such as mutual funds and bank deposits and long-term savings instruments such as pensions and life insurance. At present, this aggregate exemption is Rs 1 lakh per year. The catch is that this includes deductions under section 80CCC and 80CCD. That is, the limit is a combined one for savings of various types. All short-term or medium-term, and a few expenses like education, are clubbed within the present Rs 1-lakh exemption limit.
The Economic Times reported Life Insurance Council secretary general Mr. S. V. Mony as saying, “Life insurance and pensions are probably the only avenues for long-term savings. Therefore, it is necessary to encourage long-term savings affirmatively. The investor preference tends to favour short-term investments in the absence of a clear differentiation and incentive for long-term investments. The council has been making this submission to the government in the past, too.”
Another item in the wishlist is the doubling of tax deductions on the health premium. The limit is currently Rs 15,000 and Rs 20,000 for senior citizens.
