Mumbai, Feb 29 (UNI) Aviva Life Insurance Managing Director Bert Paterson today expressed disappointment over the lack of take away to the insurance sector from the Union budget for 2008-09.
He said that the budget had nothing positive for the life insurance sector, though it had significant announcements on agriculture, education and health.
''The budget, this year, is yet another lost opportunity for the insurance sector. We had two big expectations, a distinction between short-term and long-term savings instruments under section 80 C and carry forward of losses for a long-term gestation business like insurance. Instead, the asset management services for ULIPs have been brought under the service tax net which can have an adverse impact on long-term savings,'' Mr Paterson said.
He said that the industry had hoped that the Finance Minister would promote long-term savings by making a distinction between short and long-term savings under section 80 C. On the contrary, by levying the service tax, the proposal would act as a deterrent to long-term savings as it could result in higher costs for the customer, and sought Mr Chidambaram to reconsider the proposal after a discussion with the industry.
Over the past few years, the Government has clubbed both long-term (insurance and pensions) and short-term saving instruments (mutual funds/ bank deposits) under the same tax treatment. To encourage long-term savings, it is important to have separate limits for each, Mr Paterson added.
''We are disappointed that the Government has not considered this critical issue. Insurance business is a long-term gestation business and most insurers do not make profit even in the tenth year of operations. Currently, insurers are allowed to carry forward losses for only eight years. Insurers would not be able to set off the huge losses incurred during the initial years,'' he said.
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