Insurance Regulatory and Development Authority (IRDA), the regulator of insurance industry of India. IRDA has requested government of India to make alteration in the provision of Direct Tax Code (DTC) which says insurance policies with low insurance cover will not be eligible for tax deduction.
As per the latest draft of DTC, insurance policies which offers life cover of less than 20 times the annual premium will not be eligible for tax deduction. Which means, if one is paying annual premium of Rs 10,000 against an insurance policy and if his policy offers a life cover of less than Rs 2 lakh i.e Rs 10,000*20 then he will not eligible to claim tax deduction against his policy.
IRDA has written a letter to the Government of India, requesting to alter the provision of DTC which restricts insurance policies with low insurance cover to be eligible for tax deduction. IRDA has asked to make some relaxation in the provision by reducing the life cover to 10 times.
According to IRDA, this provision is not in favour of insurance industry as according to income tax act, insurance policies with life cover of 5 times the annual premium is eligible for tax deduction. And suddenly making it to 3 times more will definitely make adverse effect on the insurance industry.
IRDA is working towards making insurance products more transparent for its customers by providing adequate information and increasing the reach of insurance products especially in rural and semi rural areas by bank branches. All these initiatives will be productive for the insurance companies as this will resolve the most of the issues of the clients.
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