IRDA Mulling to Introduce New Tax Exemptions Separately for Life Insurance Policies

Insurance Regulatory and Development Authority (IRDA) is mulling to make insurance policies more investor friendly by introducing tax exemptions on insurance policies.IRDA has backed a move to introduce separate tax exemption limit on life insurance policies. This move will help in promoting insurance as a tax saving instrument.Life insurers have been seeking separate income-tax exemption limit of Rs 50,000 for premiums.At present, investments in instruments like Insurance Policies, Pension Plans, Provident Fund, National Saving Certificates are eligible for combined deduction of Rs 1 lakh.The budget proposed that all Insurance Policies, except Pension Plans, would have to offer a cover of at least ten times the annual premium to be eligible for Tax Benefits under Section 80C and Section 10 (10D) of Income Tax Act.Insurers say that though insurance policies offer low returns in comparison to other products, both the regulator and the finance ministry is trying to make it more investor-friendly by allowing tax exemptions.But insurers say that protection was the first goal of an insurance policy and investment came later. Hence, investors have to be clear about what they want. If investors want pure investment then insurance might not be the best bet for them.But proposal for introducing new tax exemptions separately for life insurance policies will definitely help in increasing the penetration of life insurance in the country.