India Inc is pitching for easing the common man?s tax burden and a policy push to encourage long-term savings instruments like life insurance and pension.
In its pre-budget memorandum, industry body Ficci has suggested to the government that the upper limit, under which an individual claims exemptions under Section 80C of the Income Tax Act, be doubled to Rs 2 lakh.
Noting that life insurance and pensions are the main segments of financial services which take care of the long-term needs of individuals, the industry body has asked for a separate additional deduction limit of Rs 1 lakh for long-term investments like life insurance premium, pension and annuities.
According to Ficci, this category should be in addition to the deduction for education expenses of children and the repayment of housing loan installments, equity linked savings schemes and others.
Justifying its stand, the industry body said there had to be a clear distinction in the treatment given to long-term and short-term savings. ??So far there has not been any significant support in tax policy to actively encourage long-term savings which is very much needed,?? it said.
A McKinsey report recently said the premium income of the country?s life insurance market could witness a jump from the current $40 billion to $80-100 billion by 2012, thanks to increase in per capita income and deeper penetration into the market by existing and new players. According to a recent study by Allianz Global Investors, the assets under management in the pension sector in the country would nearly quadruple from Rs 2.3 lakh crore from 2006 to Rs 8.04 lakh crore in 2015.
Also, the industry body said the regulations on transfer pricing should be flexible. Transfer pricing rules in tax laws are meant to deal with underpayment of tax by companies.
Noting that there are several instances where ??non-resident associated enterprises?? (many of them are large MNCs having global presence) help Indian companies in export promotion, Ficci has pointed out that while determining tax liability, the application of arms length principle for such export sales by not taking into account of the practical situations would be detrimental to Indian companies. ??It may be desirable that the transactions of export sales to non-resident associated enterprise do not fall within the purview of such regulations. The scope of definition of ‘associated enterprises’ also needs a review,?? Ficci said.