Monday, February 6 2006 16:25 Hrs (IST) - World Time -

New Delhi: In the run-up to Budget, insurers today (Feb 6,2006) demanded exemption of group super-annuation schemes from Fringe Benefit Tax as it is not a cash benefit that is offered to employees every month.

Insurers have also asked Finance Minister P Chidambaram to keep life insurance policies and pension annuities out of the ambit of the proposed 'EET' model that envisages tax on withdrawals to encourage long term savings, which can be channelised for infrastructure development.

The Life Insurance Council under IRDA has already submitted its memorandum to Finance Minister P Chidambaram.

"The first concern is the FBT on group super-annuation schemes. should review the decision to charge full FBT on these schemes. If complete exemption is difficult, then FBT should be imposed on 20-30 per cent of the value of super-annuation benefit," S V Mony, who heads the council, said on the sidelines of a Ficci seminar here today.

Justifying the rationale to exempt pension contribution from employers from FBT, Mony said super-annuation benefits are not cash benefits given to employees immediately but effectively given after 20-30 years.

HDFC Standard Life CEO Deepak Satwalekar said the 'EET' model should not be applied to life insurance policies as it will hurt the common masses more.

"If withdrawals from life insurance policies are taxed as per the EET mode, people in the lower income bracket will end up paying taxes at the highest rate of 30 per cent," he said.

Echoing on same lines, Mony said the present concession under Section 10 (10D) of Income Tax Act on withdrawals from life insurance policies should be retained.