Finance Minister Nirmala Sitharaman stated that the planned adjustment will not have an impact on insurance contracts issued after March31, 2023

Budget 2023: According To Finance minister Nirmala Sitharaman, Life Insurance Policies With Yearly Premiums Over 5 Lakh Will Be Taxed On Their Maturity Proceeds

According to the Union Budget plan made public on February 1, an individual will be required to pay tax on the maturity amount of life insurance contracts if the total yearly premium exceeds 5 lakh.

According to the February 1 Union Budget proposal, Finance Minister Nirmala Sitharaman suggested that “income from only those policies with aggregate premium up to 5 lakh shall be exempt where aggregate of premium for life insurance policies (other than ULIP) issued on or after April 1, 2023, is above Rs. 5 lakh.”

The tax exemption granted to the sum received upon an insured person’s death will not be impacted by this. She added that it won’t have an impact on insurance contracts issued up to March 31, 2023.

One of the key drawbacks listed in the finance bill, according to Nidhi Manchanda, Certified Financial Planner and Head of Training, Research, and Development at Fintoo, relates to the taxability of the maturity proceeds of a life insurance policy.

The Budget plan states that the maturity proceeds of all life insurance policies (other than unit-linked insurance policies or ULIPs) with annual premiums of more than 5 Lakh that are issued after April 1, 2023, will henceforth be taxed.

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If a person has more than one life insurance policy that was issued on or after April 1, 2023, and if the total amount of premiums paid for all of those policies exceeds Rs. 5 lakh, the maturity amount will be taxed, Ms. Manchanda noted.

Following the Budget, the stock prices of SBI Life Insurance and HDFC Life Insurance both fell by 10% and 11%, respectively.