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FDI limit hike has insurers smiling — Service tax on risk premium for life cover is a dampener
Our Bureaus
Mumbai/ Hyderabad,
July 8
PRIVATE insurance companies have reason to celebrate with the lifting of the sectoral cap in the insurance sector to 49 per cent in the Union Budget 2004-05, as against 26 per cent earlier.
However, to offset the excitement, there was also an imposition of service tax of 10 per cent on the risk premium for life insurance, which has the industry with mixed feelings.
The FDI hike has been a much-awaited plea of these companies, who believed that they could plough in more money into the business if their foreign partners were permitted an increased holding.
"The FDI limit increase to 49 per cent is certainly welcome and has been a long-standing demand of the industry. Though both our joint venture partners, Allianz and Bajaj Auto were working as equal partners since inception, the increase in the limit would reflect that in ownership," said Mr Kamesh Goyal, CEO, Bajaj Allianz General Insurance.
Mr Shivaji Dam
Mr Shivaji Dam, MD, Kotak Mahindra Old Mutual Life Insurance Limited: "The Budget has levied a service tax of 10% on the risk premium for life insurance policies. The levy is unwelcome. India is an under-insured country and such service tax will unnecessarily make the policy expensive and also complicate the payment of life insurance premium. My strong recommendation will be to withdraw the service tax on risk premium."
Mr Sam Ghosh
Mr Sam Ghosh, Country Manager Allianz and CEO, Allianz Bajaj Life Insurance: "By raising the FDI in the private life insurance to 49 per cent from 26 per cent, the Government has provided financial flexibility to the insurance companies. This policy will henceforth make investments into insurance companies much more attractive. The increase in the tax exemption limit on personal income i.e. 1,00,000 should increase the investible surpluses of individual investors thereby increasing their allocation to insurance products."
Mr Nani Javeri, CEO, Birla Sun Life Insurance Company Ltd: "The maiden Budget of the new Government reaffirmed the resolve of the Government to accelerate the process of reforms with an adequate emphasis on rural and infrastructure spending.
Mr Stuart Purdy
Aviva Life Insurance Managing Director, Mr Stuart Purdy: " The raising of the equity cap will not only bring more money but also help in expanding the industry. Currently of the Rs 3,179 crore capitalisation of private life insurance companies only Rs 827 crore is FDI. With the increase in the equity limit, many more foreign insurers would be interested in entering the market, resulting in further expansion of the life insurance market along with offering a wider choice of products and services to the customer."
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