homepersonal finance NewsBudget 2023 | Insurance policies with premiums above Rs 5 lakh to be taxable
Budget 2023 | Insurance policies with premiums above Rs 5 lakh to be taxable
Budget 2023: If premium paid by an individual for a savings life policy is more than Rs 5 lakh than on maturity the income from policy will be taxed. The threshold of Rs 5 lakh will be applicable on first year premium and not first year + renewal.
Budget 2023 has proposed to take away the tax free advantage from savings insurance plans issued on or after April 1, 2023 whose annual premium is above Rs 5 lakh. The new proposal will, however, not impact taxation of unit-linked insurance plans (ULIPs), term insurance and old policies, Union Minister of Finance Nirmala Sitharaman said.
As a result, the income from only those policies with aggregate premium up to Rs 5 lakh shall be exempt. This will not affect the tax exemption provided to the amount received on the death of person insured, FM said.
"It will also not affect insurance policies issued till March 31, 2023," she said.
Simply put, if premium paid by an individual for a savings life policy is more than Rs 5 lakh than on maturity the income from policy will be taxed. The threshold of Rs 5 lakh will be applicable on first year premium and not first year + renewal.
The threshold of Rs 5 lakh will be applicable on multiple policies of an individual.
Rakesh Goyal, Director of Probus Insurance broker said this proposal will have a detrimental impact on the insurance business.
Indian insurance companies were top losers post budget, with HDFC Life, SBI Life Insurance, ICICI Prudential Life Insurance Co, Life Insurance of India, General Insurance Corp and Max Financial tumbling between 4.5 percent to 11 percent.
In an interaction with CNBC-TV18, Vibha Padalkar, MD & CEO, HDFC Life Insurance said that the budget changes linked to insurance is likely to have a 10-12 percent impact on out top line. The impact on the bottom line is likely to be around 5 percent if we do nothing to mitigate the impact of change, she said.
Other experts say that the biggest impact will be on HDFC Life Insurance as the firm has 35-40 of its portfolio of savings products. HDFC Life, compared to other players has larger share of larger ticket policies.
SBI Life Insurance, ICICI Prudential Life Insurance, Life Insurance Corporation (LIC) have ~20-25 percent of their mix in terms of savings. 10 percent of SBI Life, ICICI Pru Life, LIC savings mix will be large ticket policies.
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First Published: Feb 1, 2023 3:11 PM IST
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