Chennai, July 6 (IANS) The union budget for 2009-10 presented by Finance Minister Pranab Mukherjee Monday has disappointed the domestic life insurance sector.
“There is no major announcement on tax sops. It is also disappointing to note the government’s silence on Exempt Exempt Tax (EET) committee’s report,” a top official of a private life insurance company told IANS, requesting anonymity.

EET is imposed on tax-free savings when they are finally withdrawn.

Terming Mukherjee’s budget as “pretty ordinary”, he said the industry was disappointed that the government was silent on relaxation on service tax on unit-linked insurance policy (ULIP) and measures to encourage long-term savings.

The Life Insurance Council, an association of all life insurance companies, had expected relaxation on service tax on ULIPs as the players pay on all types of charges, like entry and exit charge, policy administration charges, asset management charges and other miscellaneous charges.

The industry’s contention is that mutual funds pay service tax only on asset management charges collected by them.

The other demands of the life insurers are stand-alone deduction in income tax for long term investment, extension period for carry forward of net losses and exemption of annuities from taxation.

However, Bharti Axa Life Insurance chief financial officer V. Srinivasan was less critical.

“The finance minister is trying to increase rural income with investments in infrastructure projects. Over the years, the savings in the rural areas will increase which in turn augurs well for the life insurers,” Srinivasan told IANS.

His one complaint about the budget is the continuation of the Securities Transaction Tax (STT) for life insurers whereas the same has been abolished for the trusts managing the New Pension System (NPS).