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Home / Insuremagic Exclusives

My Budget Wishlist
Shivaji Dam, Managing Director,
OM Kotak Mahindra Life Insurance

1. What are your hopes from the coming budget bring for the insurance sector?
   
   The insurance penetration in India is very low as on date. Only 7-8% of the Indian population is insured. It is essential to increase this insurance penetration. The government can play a big role by encouraging insurance penetration through specific tax benefits for various investments in India.
   The tax benefits can be:
   - A specific exemption, similar to the benefit u/s 88, where a deduction of the premium amount is made from taxable income. The deduction limit should not be combined with the other investments made, as is being done presently u/s 88.
   
   
2. What changes will the Budget 2003-04 bring for pension products and Annuities?
   
   It is necessary to provide a fillip for pension products in India. The social security system is inadequate. Infact, the social security system was provided by the joint family system, which is fast disintegrating. The inflation and lowering of interest rates are creating pressure on retired people.
   
   A similar situation is likely to arise to people at the age of 35-45 years unless they start investing from today for the future. Presently, the government has a prohibition u/s 80CCC, which allows a deduction of upto Rs 10,000 from the taxable income every year. Any investments above Rs 10,000 will not be deducted. However, on the maturity proceeds, an amount equivalent to 33 1/3% received (which can be computed) is tax-free whereas the remaining amount received is in the form of annuity and is taxable.
   
   In extreme situations, a person is not getting a tax deduction when he is investing, but he is paying tax on savings and earnings on the receipt (except for the committed value). It is suggested that in order to encourage more people to invest in pension products, people should get the full premium paid as a deduction from his taxable income for the year & pay tax on the annuity as currently provided.
   
   
3. What will be the implications of the Kelkar committee report?
   
   The Kelkar committee has suggested an increase in the exemption from Rs 10,000 to Rs 20,000. My recommendation is more radical; i.e. the entire premium paid should be allowed to be deducted from the taxable income in order to calculate tax.
   
   
4. What are your overall expectations from the budget?
   
   I am hoping that the Finance Minister will address the fiscal deficit by controlling the government expenditure. At the same time, he will initiate steps to encourage private investments which will in turn lead to more employment and a greater demand for all products. I also hope that the Finance Minister will take the second-generation reforms, which will help the country in the long term.
   

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