The general insurance industry has asked for tax concessions as the Finance Ministry gets ready for the upcoming Budget.
General insurers are seeking tax exemptions on homeowner’s insurance and personal accident covers. “The penetration level of general insurance in India is very low. So it’s time that the Government looks at giving this kind of tax breaks,” said Mr. G. Srinivasan, CMD, New India Assurance.
“We have asked for extension of the exemption limit of tax benefits in health insurance as well,” said K. G. Krishnamoorthy Rao, MD & CEO, Future Generali Insurance.
General insurance companies have also asked for capital gains tax exemption on their profits earned through investments in the stock market which other financial institutions enjoy. “We have asked for a review on this as we are significant players in the stock market, and in an amendment last year this profit was treated as business income,” said Srinivasan.
Foreign reinsurance premium
General insurers also want the Finance Ministry to remove the withholding tax, or tax deducted at source (TDS), of 20 per cent on reinsurance premium which is proposed in the Direct Taxes Code.
Typically, in a reinsurance arrangement, an insurance company passes on (cedes) a risk partly or fully to a reinsurer. For the risk transferred, the insurance company pays premium to the reinsurer.
“Out of the Indian non-life industry premium of Rs 58,376 crore in 2011-12, a sum of Rs 4,015 crore (7.52 per cent) is paid as reinsurance premium to overseas reinsurers. When the reinsurance premium is paid, it is an income for the reinsurer (and not profit), as they will have to honour claims of the risk transferred to the reinsurer,” said a CEO of a general insurance company.
The general insurers have contended that the imposition of TDS will deter foreign reinsurers from accepting reinsurance risks in the Indian market and will prevent Indian general insurers from underwriting large risks.
deepa.nair@thehindu.co.in