New Delhi, Dec. 1 :    New Delhi, Dec. 1:  The Insurance Regulatory and Development Authority's proposal to peg the tax breaks to be given to pension funds at the same level as the existing tax savings system has drawn criticism from tax experts and industry professionals who feel that more incentives are needed for the pension sector to grow in the initial stages. IRDA has recommended that contributions towards pension be made from taxable income but should be subject to a tax rebate of 20 per cent up to Rs 80,000 per annum of initial contributions. This will replace the infrastructure limit with that of pensions, IRDA has stated. As of now, investments up to Rs 60,000 in various avenues like Public Provident Fund (PPF), life insurance policies, mutual funds, insurance and pension plans can avail a tax rebate of Rs 12,000 from the total tax payable. Recognising the need to mobilise funds for the infrastructure sector, an additional investment of Rs 20,000 in notified infrastructure bonds allows an individual an incremental rebate of Rs 20 per cent, thereby increasing the total tax rebate under section 88 to Rs 16,000. What the IRDA has instead suggested is that investments in pension schemes up to Rs 80,000 get a tax rebate of 20 per cent which comes to the same figure of Rs 16,000. In fact, IRDA has suggested that income earned by pension funds and annuity funds should be exempt from income tax to provide a level-playing with pension funds of life insurance companies. IRDA has also suggested that the commuted value of pensions should continue to be exempt and amount received as annuities should also be totally tax exempt. Pavan Kumar Vijay, a practising company secretary and a member of the Northern India Council of the Institute of Company Secretaries of India, feels that the individual has been neglected at the expense of the funds. 'The government should realise that it is the individuals, mainly the honest taxpayers, who will end up saving in the pension funds. A better deal in the form of total tax exemption or hiking the tax incentive rate is what is needed,' he says. According to Association of Mutual Funds of India chairman A.P. Kurian, the pension sector reforms would be good for the industry as it would now be able to access the full Rs 80,000 as against Rs 60,000 which was given to PPF. However, the tax incentives remain the same for the individuals. 'The government would not like to forgo any tax revenue and thus the tax incentives have been maintained at the same levels. Although we would have liked to have more exemptions coming the way for individuals, I think we have to strike some balance,' he said. According to a practising chartered accountant with a leading firm, the tax incentives have been planned keeping in mind the fact that we barely have 2.5 crore taxpayers in the country. 'The pension reforms are broadly targeted at the unorganised sector who have no cover at present. This category in fact does not normally pay any taxes and thus the decision to continue with the same level of tax incentives is probably influenced by them,' he says. In fact, some like Vinod Chandiok, a practising chartered accountant with Grant Thornton, feel that a sense of balance has to be maintained between the pension companies and individual regarding the tax rates. 'If the income earned by pension and annuity funds are tax-free, then why discriminate against the individuals? I feel that the sector should not survive on the subsidy regime which anyway was to certain extent justified in the days of high inflation rates,' he said. 'We should end the tax-free regime right from the beginning for the companies and instead tell them to provide competitive returns. The same then should stand true for individuals,' he said.