Discussions were held on matters relating to indirect taxes and direct taxes. It was agreed that the following issues will be taken up wi...
Discussions were held on matters relating to indirect taxes and direct taxes. It was agreed that the following issues will be taken up with the CBDT and CBEC, as the case may be, and appropriate decisions arrived at:
(a) Reduction in service tax on first year regular premium as well as single premium policies.
(b) Treating annuity policy on par with subscriptions to the National Pension Scheme (NPS) and to be exempted from Rule 6(7A) of the Service Tax Rules.
(c) To examine whether the first year premium and subsequent premiums of social security insurance schemes such as JanashriBima Yojana (JBY) and Aam Aadmi Bima Yojana (AABY), which are intended to benefit the weaker and vulnerable sections of the society, may be exempted from service tax. A similar exemption to be examined in the case of Micro Insurance policies.
(d) At present, service tax is levied on premium on accrual basis. The CBEC will be requested to examine whether service tax may be assessed on realization basis.
(e) Department of Revenue will examine whether, in addition to NPS, some insurance pension products as approved by IRDA may be included in the separate limit over and above the limit of Rs.1,00,000 under section 80C of the Income tax Act for the purpose of income tax deduction on the premium paid.
(f) CBDT will examine whether existing policies can be grandfathered whenever changes are made to direct tax laws, so that changes will apply only to policies issued prospectively.
(g) CBDT will examine whether contribution made to post retirement medical scheme offered by insurance companies may be included in Section 36(1)(iv) of the Income tax Act and the sum paid allowed as a deduction.
(h) At present, TDS applies on every payment of commission to an agent above Rs 20,000. CBDT will examine whether the exemption can be shifted from every payment of commission to a cumulative commission payment exceeding, say, Rs.50,000 or any other suitable threshold in a year.
FM has asked Department of Revenue and the CBDT/CBEC to complete the examination of the above suggestions by October 10, 2012 so that appropriate decisions may be announced shortly thereafter.