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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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