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November 5, 2015
To give new business from single-premium business a boost, life insurers in India plan to ask the government to do away with the 2% tax deducted at source on such policies.
In particular, the country’s biggest life insurer, state-owned Life Insurance Corporation (LIC), has seen first-year premiums from individual single-premium products plunge by 43% to INR37.52 billion (US$573 million) for the six months ended 30 September 2015, reported the Financial Chronicle citing data from the Insurance Regulatory and Development Authority of India.
The premium decline is attributed to an amendment to the Income Tax Act following last year’s Budget. Under it, the insurance company has to deduct 2% tax at source from the maturity proceeds of a life policy if the premium paid out turns out to be more than 10% of the sum assured. Speaking to Financial Chronicle, a top LIC official, said: “The life insurance industry would also be writing to the government through the Life Insurance Council while we would also write separately.” However, for the 23 private life insurers, the combined first-year premiums from single-premium policies grew by 16% to INR12.51 billion for April to September.