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The Budget has hiked the maximum pension limit to Rs 1 lakh and abolished the FBT on superannuation - these have no doubt cheered the industry but a hike in the service tax has been a dampner.

The insurance industry on the whole is upbeat about Budget 2006-07. The FM has done away with the much sought after sub limit of Rs 10000 under pension funds and hiked the upper limit under the same to Rs 1 lakh. What's more. It has also abolished FBT on group superannuation below a limit of Rs 1 lakh per year per employee.

Says Stuart Purdy, Managing Director Aviva [Get Quote] Life Insurance, "The removal of the cap of Rs 10,000 for investment towards pension under Section 80CCC is a favourable move to encourage long-term savings. Now customers have the flexibility to invest up to Rs 1 lakh in pension plans.". So far the limit was Rs 10,000 under Section 80 ccc.

Opines Gary R. Bennett, Managing Director and Chief Executive Officer, Max New York Life, "The FBT on superannuation has been rationalized to allow up to Rs 2 lakh per annum of investment. This will help the group insurance business to grow."

The insurance industry has been long waiting for a hike in the FDI to 49%. While this announcement has not yet come the FM has stated that a comprehensive Insurance Bill will be presented this year which has cheered the industry.

Emphasizes Nani Jhaveri, CEO Birla Sun Life Insurance "I will like to commend the Finance Minister for coming up with a positive Budget on expected lines. The Budget reemphasizes on the need for higher investment in the infrastructure, education and rural sectors for meeting the high GDP growth target set by the prime minister.

The continued thrust on fiscal deficit management to meet commitment under the FRBM Act is very positive.

But a hike in the service tax to 12% has turned to be a major disappointing factor. Says Gary R. Bennett, Managing Director and Chief Executive Officer, Max New York Life," The increase in the burden of service tax, will raise input costs. This further weighs down a nascent industry like life insurance, which has a long gestation period."

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