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Commenting on Union Budget 2011-2012, G Murlidhar, Chief Operating Officer, Kotak Mahindra Old Mutual Life Insurance said “The proposal to introduce the insurance bill in the current session is a welcome step towards insurance sector reform.
It will bring the overall legal and policy framework governing the sector abreast with current realities, encourage greater investment and make the sector more competitive. The taxable service in respect of Life Insurance Service, which was previously restricted in relation to only “risk cover” in life insurance products no longer remains.
In other words all services provided to a policyholder by a Life Insurer would now be subject to service tax. It must be noted here that till now while service tax was only payable on risk premium on all insurance products (both Traditional and ULIP), in Unit Linked Insurance Products service tax was also payable on the Fund Management Charge. The burden of service tax on the policyholder is bound to increase and will result in lower returns to the policyholder. “
Source : Capitalmarket.com
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