Your premium on life insurance plans can climb up or returns on life insurance plans may decline by 0.5% to 0.75% with finance minister Pranab Mukherjee bringing services by life insurance firms in the area of investment in the reach of service tax.

During his budget speech, the finmin said, "It is being provided that tax shall be charged in the portion of the premium... The composition rate is also being increased from one per cent to 1.5 per cent."

In case of customary endowment schemes, the rate of service tax has been raised to 1.5% as against 1%.

In case of Ulips, service tax will be imposed on entry load.

Mr. TR Ramachandran, MD and CEO, Aviva Life Insurance, stated, "Under traditional policies, insurers do not levy a separate fund management charge. Therefore, how the taxable value will be determined is yet to be notified by the government. At present, in case of pure term life insurance policies, normal service tax of 10 per cent is applicable. "

This has been heightened to 1.5% of overall premium.

Mr. GV Nageshwara Rao, CEO, IDBI Federal Life Insurance said, "Insurance companies will have to pass on the tax burden to customers, but by how much is not clear right now."

Insurers are distressed with the transformations in tax laws for life insurers.

Mr. V Srinivasan, chief financial officer, Bharti Axa Life Insurance, said, "There seems to be no long-term stable tax regime for the life insurance sector, considering that it is a long-term business. Such frequent changes in taxation in the sector will adversely impact the industry. The hike in service tax on participatory business will have a negative impact for the policyholders."