Simplify tax laws to improve insurance penetration
There are many ways of using taxation as a tool for achieving these goals, the simplest being allowing the premium amount as deductible from the total taxable income while computing tax liability of an individual or a legal entity
The other method is to exempt claims proceeds from any kind of tax, be it maturity or death claim amount, for life policies and the amount paid to indemnify loss of goods, property or any physical asset due to accident, fire theft or natural disaster, etc. In our country, a large segment of people look at insurance as a sure tool of escaping taxes on their income and, at the same time, are motivated to opt for insurance for long-term savings and for providing financial security to their family or business.
Over a period of time, tax implications and the exemption rules have become complicated and, at the same time, there have been uncertainties every year about how the tax treatment is going to be like following the Budget exercise by the government every year. The imposition of the service tax has further complicated tax issues and the perpetual uncertainties about the Direct Taxes Code has literally confused not only the buyers of a policy, but also the sellers.
Tax issues in insurance have far-reaching
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