Life Insurance, Health Services Becoming More Expensive

The cost of life insurance and health care can get to Budget 2011, the provision of services to hospitals and life insurance companies under the service tax.

Move expected to result in a higher premium for insurance products in all types of anti-term plans, including products such as own funds and pension funds of companies that are able to transfer the additional costs for buyers.

"It 's a service charge already in the traditional political risk cover. When is 1%. However, the budget proposal, the tax service will increase by 1.5% in the case of Ulips (unit-linked insurance products ), "said Rajesh Sud, President and CEO, Max New York Life Insurance Co. Ltd." It will pay the full premium, if traditional policies. "

South said that the movement was against the general expectation that the Finance Minister Pranab Mukherjee will give tax incentives to promote more long-term savings and insurance.

Kartik Jhaveri, Founder and Director, Transcend Consulting, a private financial planning and wealth management company, also said the move was unexpected.

"Insurance companies are likely to pass at least in part, the burden to consumers," said Jhaveri. "The transfer may also be advantageous to the management company."

P. Nandagopal, CEO and general manager of the first India Life Insurance Co. Pvt. Ltd, said the impact of the proposed changes would likely be marginal.

"The tax shall not apply to all premiums and, consequently, the impact will be less," said Nandagopal. "But taxing the investment component is a tedious process and we must await the end of the guidelines to calculate the actual impact on the insured."

Healthcare costs are rising, with Mukherjee, offers all the services provided by hospitals with beds for 25 or more and the air conditioning in the service tax net.

Until now, service fee was charged for hospital services only to customers whose payments were made by an insurance company or business unit. But the budget proposes that the tax is also levied on customers who pay for themselves.

The rate of taxation of services remains at 10% and a reduction of 50% means that the effective rate is 5%.

This step removes an anomaly in the tax structure.

"Previously, there was a service charge levied on the installation of cashless policy of insurance. So even if a customer has paid the hospital charges not paid service tax, the exercise of a secured interest without money would have to pay a service fee, "said Bhargav Dasgupta, Executive Director and CEO of ICICI Lombard GIC. "This budget has eliminated this anomaly. But the bad news is that the costs of health care in India will increase."