Monday, December 4, 2023

Budget 2023: With the decision to impose tax on high value insurance policies…

Budget 2023: In the budget presented on February 1, 2023, Finance Minister Nirmala Sitharaman has announced the imposition of tax on income from high value insurance policies, due to which there is uneasiness in the insurance sector. On Tuesday, February 7, 2023, the officials of the insurance sector met the Finance Minister under the leadership of CII and demanded concessions in this budget proposal. 

The life insurance sector has demanded from the Finance Minister that instead of Rs 5 lakh, tax should be charged on income from high value insurance policies with an annual premium of Rs 10 lakh.  Representatives of the insurance sector have appealed to the Finance Minister to levy tax on the profits of such insurance policies at par with debt mutual funds. 

It will not affect the tax exemption given on the amount received at the time of death of the life assured. That is, the amount received by the nominee on death will be completely tax-free. Also, it will not affect insurance policies issued till March 31, 2023. According to the budget proposal, the maturity amount of all life insurance policies issued after April 1, 2023, except ULIPs, whose annual premium is more than five lakh rupees, will now be taxed.

The effect of this announcement made in the budget was seen in the stock market and there was a big fall in the stocks related to the life insurance sector.  After the budget, shares of HDFC Life Insurance SBI Life Insurance fell up to 10 per cent. Insurers believe that this decision will impact the topline and margin of life insurance companies. 

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New Tax Regime: Difficulty for those earning Rs 7 to 7.29 lakh annually, the benefit of tax exemption will not be available in the new income tax regime!

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