India: The Union Budget proposes limiting the tax exemption on life insurance maturity benefits.


In her annual Union Budget speech yesterday, Finance Minister Nirmala Sitharaman proposed that only income from policies with an aggregate premium of up to INR500,000 will be exempt from income tax in cases where the total premiums for life insurance policies (other than unit-linked insurance policies [ULIPs]) issued on or after April 1, 2023, exceed INR500,000 ($6,115).

The tax exemption on the insured's death benefit will not be affected by this provision. Additionally, insurance policies issued prior to March 31, 2023, will not be affected.

Yesterday's budget is for the fiscal year that begins on April 1, 2023.

Reactions Insurance executives believe that the move is not favorable to the industry. 

"This proposal is likely to dent the sales of non-par products, which have been witnessing strong growth over the last few years, especially during the COVID pandemic," Ageas Federal Life Insurance's CEO, Mr. Vighnesh Shahane, told The Economic Times. Since the cap of INR 500,000 applies to all insurers' life insurance policies, individuals who have exhausted their limit with their primary insurer may be discouraged from purchasing additional policies."

The Indo-Asian News Service reported that the change will have an effect on savings products, which are typically products with high margins and high value (but not protection).

Financial lift

On the more extensive front, the Spending plan is viewed as giving a lift to monetary administrations, including protection.'s president and CEO, Mr. Sarbvir Singh, told Business World, "It is laudable that the Finance Minister has kept improving the ease of business right at the center of her announcements in the Budget 2023." Everything in the insurance industry is dependent on customer trust. In terms of enhancing the overall customer experience, simpler KYC procedures, enhanced DigiLocker services, and a general push toward digital transactions will all go a long way. India's insurance adoption is bound to rise as a result.

According to Mr. Tarun Chugh, Bajaj Allianz Life Insurance's managing director and chief executive officer, "Overall, the Budget is very positive with fiscal prudence and a clear focus on overall growth." This Budget has laid the groundwork for long-term growth in all sectors, including agriculture, FinTech, infrastructure, social welfare, tourism, and others, as India's economy continues to improve. With a push for both capital expenditure and consumption, it is well balanced.

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