Insurance and Indian Budget 2011-2012
Proposals in Indian Budget 2011-2012
A. Budget proposes to move the following legislations in the financial sector:
(i) The Insurance Laws (Amendment) Bill, 2008;
(ii) The Life Insurance Corporation (Amendment) Bill, 2009;
(iii) The revised Pension Fund Regulatory and Development Authority Bill, first introduced in 2005;
B. Services provided by life insurance companies in the area of investment are also proposed to be brought into tax net on the same lines as ULIPs.
C. Budget also proposes to extend the Rashtriya Swasthya Bima Yojana - a health insurance for the poor - to cover workers of the unorganized sector like hazardous mining and associated industries like slate and slate pencil, dolomite, mica and asbestos.
The insurance legislation would increase the FDI limit to 49 percent from the current 26 percent.
The LIC bill would increase the share capital of Life Insurance Corporation (LIC) to Rs.100 crore from its current Rs.5 crore.
The PFRDA Bill would bring in a full-fledged regulator for the pension sector. Now it is regulated by an interim authority.
Insurance bill will empower IRDA (Insurance Regulatory and Development Authority) to introduce forward-looking regulations to promote sustainable growth of the industry. The bill gives a lot of flexibility to the IRDA in framing regulations.
Due to the modification proposed in budget for service tax on fund management charges, some guaranteed unit linked insurance policies (ULIPs) will attract higher charges.
A very senior citizen category has been introduced at the age of 80 years and above with exemption limit of Rs.500,000. Also increase in income tax exemption limit to Rs.250,000.for senior citizens and the reduction in the age limit for senior citizens to 60 years will help seniors to enjoy pension in the retirement years without tax impact.
The bills relating to the insurance sector has been pending for past several years.
The Insurance Laws (Amendment) Bill, 2008 was introduced in the Rajya Sabha in December 2008 and was referred to the Standing Committee on Finance in September 2009. The committee is yet to submit its report.
Life Insurance Corporation (Amendment) Bill, 2009 was introduced in the Lok Sabha in July 2009 and was referred to the Standing Committee on Finance, which submitted its report in March 2010.
Pension Fund Regulatory and Development Authority Bill was first introduced in 2005 It lapsed with the dissolution of the 14th Lok Sabha
Insurance reforms in 2011-12 mainly depend on how soon the government is able to get insurance related bills introduced & passed. .
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