Financial Advisor: service tax

Monday, June 1, 2015

Increased Service Tax from 1st June 2015

Increased Service Tax from 1^st June 2015

From starting 1st June 2015, the service tax rate has been increased from 12.36% to 14%. Service tax is levied by the central government on certain services. It is paid by the end user. Eating out, travelling and mobile bill will also get costly now onwards. In financial services mutual fund distribution service has been came under the ambit of this tax this time.

At present we are paying the service tax on our insurance premium and distributor also pay the service tax on received commission by selling the insurance product. In banking space, various fees and charges linked to saving account, term deposit and debit or credit card attract service tax. Bank FD interest does not come under this tax. The interest of home loans and personal loans do not charge service tax but the processing fee and late payment fee attract service tax.

The increased tax will also affect your share trading bill. The brokerage levied on your buying and selling shares are also attract the service tax and from today the new rate would be applied. Mutual fund adviser and distributor will pay now service tax on their commissions received by selling mutual funds. The mutual fund AMC also pay the service tax on management fee.

Service tax on the mutual fund distributor will also impact the business of mutual fund badly and the new IFA get affected by imposing this tax.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Tuesday, December 23, 2014

Sector Update: Insurance

Sector Update: Insurance

Government of India is trying the best to pass the insurance reform bill in Rajya Sabha but the govt have no majority in Rajya Sabha and important bills in this session has stuck.

Impact on insurance industry of new insurance bill:

In new insurance bill, IRDA has to decide on the commission of insurance agents. Health Insurance entry capital for new player will remain same at Rs 100 crore. According to this bill, IRDA will free to formulate acts and rules and allowed to fix penalties.

One more important and lesser known provision in this new insurance bill which can increase the no. of rejected claim. Under the current rule, an insurance policy cannot be called into question after 2 years of policy issued. Under the new amendment in this bill this period would be 3 years now. The discrepancy in the new bill is that it holds insured responsible for any fraud conduct by the insurance agent whereas according to insurance regulation, which deems agent to be representative of the company.

Life insurance council has recommended for reduction in service tax to the government. At present at the time of getting policy mature proceed service tax levied on PAN card holder is 2% and non PAN card holder is 20% of the maturity amount whereas other financial products like mutual funds and fixed deposit do not attract service tax on maturity.

Now onwards, group health insurance cover will become more expensive for companies where hospitalization claims from employees exceed the premium paid. The IRDA will penalize such insurance companies as due to these losses individual policy holder pay more premium. The regulator has also asked insurance companies to come up with saving-linked insurance plan so that individual buyers do not need to pay more as the age grows.

More group health insurance policies are now offering OPD (outpatient department) expenses. With the growing competition, most of insurance companies have begun to cover day-care procedures in hospitals instead of the mandatory overnight stays.