Major impact of Budget 2023 on Insurance.
Major impact of Budget 2023 on Insurance.
The income tax exemption on the proceeds of high value life insurance policies has been proposed to be limited in the Union Budget 2023–24.
According to the proposal, which is part of an effort to better target tax breaks and exemptions, only income from life insurance policies with an aggregate premium up to 5 lakh will be exempt from taxation.
The Budget documents stated that income from only those policies with aggregate premiums up to 5 lakh shall be exempt where the aggregate of premium for life insurance policies [other than ULIP] issued on or after April 1, 2023 is above 5 lakh. The plan won't have an impact on the tax exemption provided to the amount received on the death of the insured person, nor will it affect insurance policies issued till March 31, 2023.
According to the proposal, which is part of an effort to better target tax breaks and exemptions, only income from life insurance policies with an aggregate premium up to 5 lakh will be exempt from taxation.
The Budget documents stated that income from only those policies with aggregate premiums up to 5 lakh shall be exempt where the aggregate of premium for life insurance policies [other than ULIP] issued on or after April 1, 2023 is above 5 lakh. The plan won't have an impact on the tax exemption provided to the amount received on the death of the insured person, nor will it affect insurance policies issued till March 31, 2023.
The tax code's "income from other sources" section will apply to this income. If the premium paid has never been claimed as a deduction, it will be eligible for one. Taxation for policies issued before April 1, 2023, won't change at all. preventing the rich from abusing their power.
choosing a high-deductible health insurance plan
The proposal is a continuation of a measure introduced in the Finance Act of 2021 regarding the proceeds of ULIP policies where the premium paid for any year exceeded 2.5 lakh. Both the previous and current actions are intended to prevent high net worth individuals from abusing the exemption by investing in policies with large premium contributions and then claiming exemption on the money received under such policies.
The latest proposal appears to have impacted investor sentiment in life insurance stocks, as evidenced by the shares of LIC, HDFC, and SBILife falling on Wednesday. This is in addition to the income tax benefits announced in the Budget for those under the new tax regime.
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