Country's life insurance industry wants the finance minister to bring the premium paid for life insurance policies under special tax exemption category.

In a pre-budget representation to the ministry, Life Insurance Council, a representative body of the life insurance companies in the country, pointed out that at present an income tax payee gets Rs 1 lakh tax exemption under Sections 80 CCC of Income Tax Act for savings in all types of instruments like mutual fund, bank deposits, etc, and also insurance premium. Talking to Deccan Herald, General Life Insurance Council Secretary S B Mathur said "as of now there is no separate provision for tax exemption for long term savings instrument including life insurance since the current provisions provides for deduction for investments in both short term and long term savings."

The Council is of the view that to incentivise long term savings, a separate deduction of Rs 1 lakh for long term investment such as life insurance and pension needs to be made. This would channelise much needed funds into the infrastructure sector as well as channelise long term investments into equity markets. Three years ago payment of life insurance premium used to get tax seperate exemptions and the council has appealed to restore that.

Service tax exemption

The industry has also wants the government to exempt the industry from service tax. In the Finance Act 2008, service tax category of management of investment under ULIP service' was introduced and under this category, services of management of investment under ULIP' have been subjected to service tax.

But the Council says that factually there is no service provider or service recipient under the ULIP scheme as the services of 'management of investment under ULIP' are provided by a division within the insurance company.

Pointed out Mathur "application of service tax to ULIP management functions through the deeming fiction is discriminatory and contrary to the practice in VAT jurisdictions around the world, so the service tax on ULIP must be withdrawn."