LIC’s Traditional Plans to Get Dearer - Economic Times , Page 16 on 25/07/2013 From Oct, insurer to charge an additional 3% from policyholders towards service tax LIC’s traditional policies will get dearer by 3% from October as the insurance behemoth plans to charge from customers the service tax levied on non-unit linked products. At present, LIC absorbs the service tax on behalf of the policyholders. From October, policyholders will have to pay an additional . 3,000 towards service tax on a premium of . 1 lakh. LIC agents are pushing sales by telling customers they can escape the tax by buying traditional policies before October. “Come October, LIC is going to levy service tax on traditional insurance products — endowment and moneyback, which was so far paid by the corporation,” said an LIC agent. “The corporation included it in the contract but will charge it upfront from policyholders.” The budget has proposed a service tax of 3.09% on traditional life insurance policies, up from 1.55%. All private sector insurance companies charge service tax from policyholders upfront. Traditional policies are debt-oriented products, where bulk of the investment is made in government and corporate bonds and up to 15% in equity. “Agents are using service tax as a selling point,” said Bharat Parekh, an agent with LIC. In the last fiscal year, LIC had reported a 6.3% drop in new business income. Total income growth was flat at Rs 2.03 lakh crore, including income from selling of new policies and renewal income. The corporation is confident of achieving 13% growth in premium income this financial year. With service tax getting separated from the policyholder fund, it is expected that bonuses and loyalty on traditional products would go up.
Posted on: Fri, 26 Jul 2013 09:03:50 +0000
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