Budget 2023: Setback For Insurance Sector As Govt Removes Tax Rebates For Insurance Premium, Plans


Rohit Kulkarni

Rohit Kulkarni

Feb 03, 2023


Nirmala Sitharaman, the minister of finance, announced on Wednesday that the government will start taxing insurance plans with yearly premiums over Rs 5 lakh that are issued on or after April 1, 2023. These insurance policies have previously been included in the category of investments that are tax-free. Unit-linked insurance plans (ULIPs) will not, however, automatically fall under the new regulations. 

Budget 2023: Setback For Insurance Sector As Govt Removes Tax Rebates For Insurance Premium, Plans

“(A) proposal…is to limit income tax exemption from proceeds of insurance policies with very high value,” Sitharaman said. From the new fiscal year 2023-24, earnings from insurance policies having an aggregate premium of more than Rs 5 lakh will not be exempt from income tax. 

Under the new proposal, the tax exemption provided to the amount received on the death of a person insured will not be affected, Sitharaman said while reading out the Budget proposal. 

She further added, “It will also not affect insurance policies issued till March 31, 2023.” 

The FM mentioned that high net worth individuals (HNIs) have been unfairly utilizing this exemption when discussing the new proposal. It should be noted that the FM removed ULIP exemptions from the Budget last year, stating that investors will not be eligible for any exemptions if the premium for any given year exceeds Rs. 250,000. 

Taxation of insurance policies

From FY2024, the income from a savings life insurance policy that has a premium payment of more than Rs 5 lakh will be taxed when it matures.  

The first-year premium alone, not the first year + renewal, will be subject to the Rs 5 lakh threshold.  An individual investor who owns multiple policies is subject to this. 

Market rout:

Following the announcement, insurance firms, including HDFC Life, SBI Life Insurance, ICICI Prudential Life Insurance Co, Life Insurance of India, General Insurance Corp, and Max Financial, were among the most negatively impacted stocks in the banking and financial sectors. 

When the markets closed, shares of the Life Insurance Corporation (LIC), SBI Life Insurance, ICICI Prudential Life Insurance, and HDFC Life Insurance all saw declines of between 8.38% and 9.31%. 

“We are disappointed with the recent budget announcement regarding the taxation of insurance premiums, as it will impact the high-value savings products that have been relied on by many customers. This, combined with the lack of increase in tax exemptions for premiums paid under health insurance, will negatively impact the growth of both savings and health insurance in India. Despite these setbacks, we remain committed to finding solutions and providing affordable insurance options to our customers while also adhering to regulations. We will also continue our efforts in promoting the importance of insurance and making it accessible to all,” said Yagnesh Dosshi, Co-Founder & Director, Raghnall Insurance Broking and Risk Management. 


Rohit Kulkarni
Rohit Kulkarni
  • 1150 Posts

Subscribe Now!

Get latest news and views related to startups, tech and business

You Might Also Like

Business
Dec. 8, 2022

Beat The Burden Of Medical Inflation With A Health Insurance

As disease rates rise and medical technology develops, treatment costs climb. It’s essential to understand that medical costs are not exclusively associated with hospitals. The cost of prescription drugs, diagnostic procedures, ambulance and operating room fees, consultations with doctors, and other costs are also constantly increasing. All of them could put a big strain on […]

Business
Dec. 8, 2022

3 Biggest Changes Of iOS 16.2 Update That Every iPhone User Should Know!

In its latest update Apple said that it is preparing for the iOS 16.2 update for iPhones across the world. Notably, like the previous release, there are a couple of changes coming for the iPhones.  iOS 16.2 Update Release Date So far, Apple has not announced a release date for iOS 16.2 update. Reportedly, the […]

Business
Dec. 8, 2022

300 Microsoft Employees Create Employee Union, First Time Ever: This Is How Microsoft Reacted

Around 300 workers at Microsoft Corp.’s ZeniMax Studios have commenced the process of forming a union which is said to be the first at the software giant in the US.  Here, Microsoft Corp.’s ZeniMax Studios known for popular video games including Skyrim and Fallout. Forming Union In Microsoft Corp Moreover, the quality assurance employees at […]

Business
Dec. 7, 2022

India Beats China In Air Travel Safety: Ranking Jumps From 102 To 48 In Global Aviation Safety

India’s air safety protocols and executions have improved drastically over the years, as validated by the findings of a specialized agency of the United Nations, the International Civil Aviation Organization or ICAO. The UN watchdog has upgraded India’s ranking in terms of aviation safety to the 48th position, jumping past the rankings of countries like […]

Recent Posts

Related Videos

   

Subscribe Now!

Get latest news and views related to startups, tech and business

who's online