Health Insurance Policy switching to another Insurance co Possible w.e.f 01.07.2011

Generally speaking, health insurance policies have specific exclusions for pre-existing diseases for a specified period of cover during the initial years. However, it has been observed that in cases where policyholder wishes to switch from one insurer to other, they do not gain any credit for the period of cover with previous insurer. Consequently the insured is tied to the insurer which is detrimental to competition. This places in policyholder at a distinct disadvantage.

2. In order to address this, the Authority is satisfied that the following guidelines on the portability of health insurance policies shall be allowed in the manner prescribed in this guideline. This circular is issued in exercise of powers conferred upon the Authority under section 14(1) of the IRDA Act, 1999 to protect the interests of the policyholders and to regulate, promote and ensure the orderly growth of the insurance industry.

3. All insurers issuing health insurance policies shall allow for credit gained by the insured for pre-existing condition(s) in terms of waiting period when he/she switches from one insurer to another or from one plan to another, provided the previous policy has been maintained without break.

For example if under a previous policy, the condition was excluded from coverage for two years and under a new plan with a different insurer the exclusion period for the same condition is three years, the new health insurance policy can only exclude the condition from coverage for one extra year.

4. This credit (in terms of waiting period) would be limited to the sum assured (including bonus) under the previous policy.

5. The insurers shall strictly comply with Regulation 4(6) of IRDA (Protection of policyholders’ interests) Regulations, 2002 in accepting the proposals when the policyholder is switching from one insurer to other.

6. If the policy results into discontinuance because of any delay by the insurer in accepting the proposal, the insurer shall not treat the policy as discontinuance and shall allow portability.

7. Insurers shall clearly draw the attention of the policyholder in the policy contract and the promotional material like prospectus, sales literature etc. that:

i. all health insurance policies are portable;

ii. policyholder should initiate action to approach another insurer, to take advantage of portability, well before the renewal date to avoid any break in the policy coverage due to delays in acceptance of the proposal by the other insurer.

8. All insurers are hereby directed that the entire database including the claim details of the policies, where the policyholders has opted for portability, shall be shared with their counterparts, if requested by the counterpart within seven working days of such request by the counterpart.

9. All applications for the portability shall be acknowledged by the insurers within three working days.

10. This shall be applicable for all existing contracts and new contracts with effect from 1st July, 2011.

S. 271 (1) (c) penalty ca S. 271 (1) (c) penalty cannot be imposed even for making unsustainable claims |

The assessee claimed deduction u/s 36 (1) (iii) for interest paid on loan taken for purchase of shares. The AO disallowed the interest u/s 14A and levied penalty u/s 271 (1) (c) on the ground that the claim was unsustainable. The penalty was deleted by the appellate authorities. On appeal by the department to the Supreme Court, HELD dismissing the appeal:

(i) S. 271 (1) (c) applies where the assessee “has concealed the particulars of his income or furnished inaccurate particulars of such income”. The present was not a case of concealment of the income. As regards the furnishing of inaccurate particulars, no information given in the Return was found to be incorrect or inaccurate. The words “inaccurate particulars” mean that the details supplied in the Return are not accurate, not exact or correct, not according to truth or erroneous. In the absence of a finding by the AO that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271(1)(c).

(ii) The argument of the revenue that “submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income” is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature.

(iii) The law laid down in Dilip Shroff 291 ITR 519 (SC) as to the meanings of the words “conceal” and “inaccurate” continues to be good law because what was overruled in Dharmendra Textile Processors 306 ITR 277 (SC) was only that part in Dilip Shroff where it was held that mens rea was an essential requirement for penalty u/s 271 (1)(c).

I-T dept introduces new number for taxpayers for tax filing

Taxpayers will now have to procure a 'new number' for filing returns and making any communication with the Income Tax department.

The unique Document identification number (DIN), on the lines of numbers like PAN and TAN, will be quoted on "every" income tax-related communication, including returns to be filed next year for the financial year 2010-11.

According to the new guidelines brought out by the Central Board of Direct Taxes (CBDT), the DIN will be mandatory "in respect of every notice, order, letter or any correspondence" with the department, by the taxpayers.

The 'Aykar Sampark Kendras' will hand out the DIN from this month.

Assesses will not be put to any trouble, as the numbers will be generated and allotted by the department itself.

I-T officials will also be allotted the numbers in order to streamline the process, the official said, adding, the number has to be produced thereon for every activity with the department.

Taxpayers and tax collectors are currently required to quote Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) among others when returns are filed with the department.

According to section 282B of the Income Tax Act that deals with DIN, if the document sent to the tax authority does not bear this unique computer-generated number then "such document, letter or any correspondence shall be treated as invalid and shall be deemed never to have been received."

DIN is aimed at bringing more transparency in tax administration as the whole exercise involves a number of documents and proformas.

Apart from regular filing of taxes, a taxpayer deals with the department for various other financial services, which DIN will help to ease.