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Insurance industry’s hopes from
Budget 2004-05
Budget 2004-05 is fast approaching. So what is the insurance
industry looking forward to? Will the archaic insurance laws
go through a major overhaul? What about the foreign equity participation?
Will the finance minister raise the maximum tax waiver of Rs
10,000 in case of pension to a decent amount?
Read up to find out.
Will foreign equity investment go up? An issue
that has come up several times in the past but was turned down
thanks to political pressure. The government, at the time the
insurance sector was being opened to private participation prohibited
100 percent foreign equity participation.
It insisted that insurance ventures could be wholly financed
by an Indian promoter or can team up with an international company
provided the foreign promoter’s investment is limited
to 26 per cent. Which means the foreign company could have a
say in management decisions but financial interest would vest
substantially with the Indian promoter.
The Indian promoter was allowed to divest his equity after a
decade through a public offering. Now things are looking up
with much lobbying taking place at the centre.
With insurance penetration levels being low in India and unexploited
potential being vast foreign insurers find India to be a promising
market and have been infusing funds. Many of them are awaiting
changes in investment norms and are eager to infuse more funds
once regulations ease.
Raising the Rs 10,000 tax waiver limit on pension:
With awareness levels going up, individuals have realised the
need for a substantial amount as pension during their post retirement
years. But as is the case with other insurance products, the
tax benefit factor rules.
The present tax limit of Rs10,000 per annum is insufficient
and is not very encouraging. Industry experts reiterate that
pension management must be taken up much early in life and to
encourage investment in pension the government must raise the
present Rs 10,000 limit to Rs 40,000 in order that an individual
can build up a good kitty for himself.
Insurance Laws: Times-are-a changing and archaic
insurance laws need to go besides provisions that nullify the
existing provisions in the older laws also need to be done away
with. The insurance industry is pressing for a revision of the
Insurance Act of 1938 and the IRDA Act 1999.
Will IRDA take care of pension management too?
The earlier government planned a separate entity for pension
management by setting up PFRDA. But the new government thinks
that with a number of overlapping functions and synergies being
many between insurance and pension there exists no need for
a separate entity to manage pension.
Apparently the Insurance Regulatory Development Authority will
manage pension too doing away with the need for a new set up
that could only add to procedural hassles and delay in expediting
matters.
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