As per the provisions of the Union Budget 2023-24, insurance policies with premiums exceeding Rs 5 lakh will no longer be tax exempt.
Kapil Mehta, co-founder of SecureNow Insurance Broker, said that income from traditional insurance with premiums exceeding Rs 5 lakh will not be exempted from tax. While, this will reduce people’s interest in buying high priced traditional insurance, it will increase the focus on term plans and pure risk cover which is good.
One concern is that this may not lead to significant changes in purely investment-oriented unit-linked insurance, Mehta said.
Arihant Bardia, CIO and Co-Founder, Valtrust, said if the premium for insurance policies (other than ULIPs) exceeds Rs 5 lakh in a year, the proceeds from those policies (excluding death benefit) will be taxable.
Bardia said this is a negative for insurance – as it generally affects savings products with high value and margin products (even if not protection). However, minor policies remain unaffected. As a negative for insurance companies overall, this affects higher-priced premium policies — thereby affecting overall industry GWP growth.
A similar provision was already introduced for ULIPs in 2021 limiting the total premium to Rs 2.5 lakh in a year for tax exempt amount,” said Bardia.
Mehta specifically said that improvements in ease of doing business, changes related to simplification of KYC process, identity and address updating, common business identifier, integrated filing, and institution Digilocker will facilitate transfer of insurance. Claim payment will also be facilitated.
Changes in personal income tax will increase personal disposable income. This will give individuals the ability to buy better, higher-priced insurance to manage their risk, Mehta said.
(Sanjeev Sharma can be contacted at [email protected])
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