Prodded by Finance Minister P. Chidambaram, the tax authorities and insurance regulator Irda are working on the possibility of removing service tax on first premium and create separate exemption limit for pension schemes.
A slew of incentives being considered by the Finance Ministry may provide the much-needed booster dose to the life insurance industry.
The department of revenue is examining whether, in addition to the National Pension Scheme (NPS), some insurance pension products—as approved by Irda—may be included in the separate limit over and above the limit of Rs 1 lakh under section 80C of the IT Act for the purpose of income tax deduction on the premium paid.
Besides, the department is looking into the proposal of exempting annuity policy from service tax in line with NPS and may reduce the levy on single premium products.
The CBDT is considering whether the total sum paid for post-retirement medical scheme could be made eligible of income tax deductions.
The announcements by the Finance Minister are expected to stimulate the growth of the sector.
"I am sure all the draft guidelines will be finalised in the first quarter of the year. I am also confident that 2013 will see the collaborative efforts to grow the life insurance sector gaining further strength. This will result in a clearly laid out roadmap for the sector," Max Life Insurance managing director Rajesh Sud said.
Echoing similar views, Reliance Life Insurance president and executive director Malay Ghosh said: "We hope to see several enabling regulations, as mentioned by the Finance Minister, in the next few months to drive stable growth for the industry in the coming years."
The key initiatives expected by the industry include bancassurance, open architecture, use and file product approval process and simplifying agency licensing process.
During 2012, the Cabinet approved the much-delayed Insurance Bill, for approval and passage in Parliament so that foreign investors can pump in more funds into the capital-intensive sector.
The government had introduced the Insurance Bill in the Rajya Sabha in December 2008 to improve and revise laws relating to the sector in the wake of private participation.
The insurance amendment Bill is an omnibus legislation to change parts of three Acts: Insurance Act, 1938; Insurance Regulatory and Development (Irda) Act, 1999, and General Insurance Business Nationalisation Act.