Shares of insurance companies were trading lower by up to 5% on the BSE on fears of higher tax rate.
HDFC Standard Life Insurance, ICICI Prudential Life Insurance, SBI Life Insurance and Max Financial Services were down in the range of 3% to 5% on the BSE. On comparison, the S&P BSE Sensex was up 0.11% at 33,597 at 02:45 PM.
The Finance Ministry has constituted a task force for redrafting the direct tax law. The task force will submit its report within the next six months.
The panel will draft direct tax legislation, keeping in mind the system in other countries, international best practices and economic needs of the country, say the terms of reference.
Insurance actuaries are currently building in tax rate of 14.3%. Increase in tax rate will have one time impact on EV (embedded value) and going forward lower NBAP margins, Kotak Institutional Equities said in a note.