The report said Department of Revenue and insurance regulator have been working on the idea of removing Service Tax on first premium and create separate exemption limit for pension schemes.
The tax authorities were also examining whether, in addition to the National Pension Scheme (NPS), some insurance products could be included in the separate limit over and above the limit of Rs 1 lakh under section 80C of the IT Act for the purpose of income tax deduction on the premium paid, said the report.
Besides, there could be an attempt to exempt annuity policy from service tax in line with NPS and reducing the levy on single premium products, said report.
The move comes at a time when India reported a fall in the insurance density for the first time in the year 2011 at USD 49 (about Rs 2,695) from USD 55.7 (about Rs 3,063) in 2010. Insurance density is calculated as the ratio of premium to population (per capita premium).
"Since opening up of Indian insurance sector for private participation, India has reported increase in insurance density for every subsequent year and for the first time reported a fall in the year 2011," said Irda in its annual report.