The insurance industry is looking forward to support from the Government in spreading the benefits of insurance across more and more Indians. The tax incentives should clearly distinguish between short term and long term savings and offer a differential benefit to all those who choose long term of over 10 years. Such a concession may not be limited to a specific product class but to the whole BFSI industry which will help all the entities in the BFSI space to join hands together to promote long term regular savings as a means to better economic and infrastructure development in this country.
Being in a capital intensive business, life insurers need capital inflow on a regular basis for operational needs. and the life insurance industry is also hoping that the Budget will unleash these sources of capital which may include early access to capital markets, Tier II capital as is allowed for banks and also liberalization of promoter holding norms.
There should be clarity on pension reform bill also known as pension fund regulatory and development authority bill. This will facilitate a new pension system, based on defined contribution, which is open to all Indian citizens. Insurance companies which have the technical knowhow in annuity and long term liabilities management should be allowed to participate in government pensions, NPS and also the provident fund management of the Government.
With the opening up of insurance sector in 2001, many new insurers entered the insurance industry. However the tax laws have not kept pace with the regulatory changes and are facing certain tax challenges based on the present tax law. With the implementation of the Direct Taxes Code 2010, which proposes significant changes in the taxation of life insurance industry, it is expected that the Government will take note of some of these at the very least and settle some long pending concerns when it comes into force in next Budget on April 2012.
Government should announce clear road map for usage of AADHAR platform not only for identification of individuals but also for a micro payment settlement gateway that can help connect the citizens, banks, insurance companies, Government agencies and all other players in the BFSI space to bring about a financial inclusion revolution in this country which is long overdue.
