Budget 2023: Changes in the tax rules of insurance policies have been announced in the Union Budget 2023. It is believed that this announcement will affect the sales of life insurance companies. The new rules will be applicable to policies issued on or after April 1, 2023
Finance Minister Nirmala Sitharaman has made a big announcement regarding the insurance policy. He said in the Union Budget 2023 on February 1 that if the premium of a traditional insurance policy is more than Rs 5 lakh, then the maturity proceeds of that policy will not be tax-free. The purpose of this proposal is to limit the tax exemption on the amount received from insurance policies of high amount. This announcement will have an impact on the sales of insurance companies.
New rules will apply to policies issued from April 1
It has been said in the proposal of the Finance Minister that if the total premium of life insurance policy, excluding ULIP, remains more than Rs 5 lakh, then the benefit of tax exemption will not be available on the income from the policy. This rule will be applicable to insurance policies issued on or after April 1, 2023. The Finance Minister has said that this rule will not affect the policies issued till March 31, 2023.
ULIP rules have changed in 2021 itself
Clear’s CEO Archit Gupta said, “You may have one or several insurance policies, the total premium of which can exceed Rs 5 lakh in a year. In such a situation, the sum assured will be chargeable to tax.” It is important to note that the tax exemption in case of ULIPs was withdrawn in 2021 itself. Then it was said that if the premium of ULIP is more than Rs 2.5 lakh annually, tax exemption will not be available on the income from it.
Insurance industry will be affected
Experts say that this decision of the government will have a bad effect on the insurance industry. Kapil Mehta, co-founder of SecureNow insurance broker, said, “This move will make people less interested in buying high-value traditional policies. But, it will increase the focus of people on term plans and pure risk covers, which is a good thing.”
Mehta said there is a concern that this decision may lead to investors drifting towards a purely investment-oriented type of ULIP. The insurance industry had high hopes from the Union Budget 2023 . The industry had demanded a separate basket of tax deductions for life insurance policies. But, this demand has not been fulfilled.
Changes in the new tax regime will also affect the insurance industry
The government has made several big announcements to make the new income tax regime attractive. Since, in this regime, no deduction is available on investment in tax saving instruments, it is believed that there may be a decline in the demand for insurance products in terms of tax saving. This is the reason that after the Union Budget was presented on February 1, there was a decline in the shares of insurance companies.
