NEW DELHI: A recent Planning Commission report which iterated the need for relaxing the capital regulations for insurance players and de-tariffing of all insurance products, also pitched for a separate income tax exemption limit for savings in long-term life insurance and pension products.
The high-level group headed by Commission member Anwarul Hoda recommended that health insurance premia be made eligible for tax exemptions, to increase the penetration of health insurance products, especially in rural areas.
The group said a separate exemption limit could be considered for investments in dedicated close-ended infrastructure mutual funds and long-term bank deposits.
Further, the group attempted to make out a case for fiscal incentives for agriculture insurance, underscoring the importance of risk mitigation in agriculture, which is essential for spurring investments in this low growth area.
At present, savings are encouraged through tax exemption under Section 80(C) of the Income tax Act. However, short-term and long-term savings instruments are clubbed under the same fungible exemption limit. Calling for capital requirement to enter insurance business to be set at 100% of the solvency margin requirement, the group said this would promote growth and reduce the cost of insurance for policy holders.
Referring to the financial markets, the high-level group stressed that exchange traded derivatives market be developed soon. Pointing out that currency and interest rate derivatives market, along with deep and liquid bond market, is the key missing market in India, the group said exchange traded derivatives play a complementary role to OTC derivatives.
It said steps should be taken for trading of vanilla derivative products on existing exchanges to enhance liquidity and depth of the markets. Structured and exotic products could continue to be transacted on an OTC basis, it added.
“There is widespread recognition that the liberalisation of the Indian economy has been uneven, with the liberalisation of the real sector far outpacing that of the financial sector, as evidenced by the continuing licensing requirements for expansion as well as entry, and fairly intensive regulation over operational matters,” the group emphasised in its report.
The high-level group headed by Commission member Anwarul Hoda recommended that health insurance premia be made eligible for tax exemptions, to increase the penetration of health insurance products, especially in rural areas.
The group said a separate exemption limit could be considered for investments in dedicated close-ended infrastructure mutual funds and long-term bank deposits.
Further, the group attempted to make out a case for fiscal incentives for agriculture insurance, underscoring the importance of risk mitigation in agriculture, which is essential for spurring investments in this low growth area.
At present, savings are encouraged through tax exemption under Section 80(C) of the Income tax Act. However, short-term and long-term savings instruments are clubbed under the same fungible exemption limit. Calling for capital requirement to enter insurance business to be set at 100% of the solvency margin requirement, the group said this would promote growth and reduce the cost of insurance for policy holders.
Referring to the financial markets, the high-level group stressed that exchange traded derivatives market be developed soon. Pointing out that currency and interest rate derivatives market, along with deep and liquid bond market, is the key missing market in India, the group said exchange traded derivatives play a complementary role to OTC derivatives.
It said steps should be taken for trading of vanilla derivative products on existing exchanges to enhance liquidity and depth of the markets. Structured and exotic products could continue to be transacted on an OTC basis, it added.
“There is widespread recognition that the liberalisation of the Indian economy has been uneven, with the liberalisation of the real sector far outpacing that of the financial sector, as evidenced by the continuing licensing requirements for expansion as well as entry, and fairly intensive regulation over operational matters,” the group emphasised in its report.
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