Mumbai: Come April 1, income from traditional life insurance policies (other than Ulips) with an aggregate premium amount of Rs 5 lakh per annum or more will now be taxable, the finance minister Nirmala Sitharaman announced while presenting the Union Budget 2023-24.
However incase of the unfortunate death of the insured person, the death benefit will continue to remain tax free. The proceeds of high value traditional insurance policies till now were tax free.
Vighnesh Shahane managing director and chief executive officer, Aegas Federal Life Insurance said, “This move is similar to the proposal introduced by the government a couple of years ago which imposed tax on the maturity amount of Ulips if the aggregate premium exceeded Rs 2.5 lakh per annum.”
“This proposal is likely to dent the sales of non-par products which has been witnessing strong growth over the last few years, especially during the pandemic. As the cap of Rs 5 lakh is applicable for all life insurance policies across insurers, it may deter individuals from purchasing additional policies if they have exhausted their limit with their primary insurer,” added Shahane.
Sitharaman also announced the introduction of a limited period scheme or women, the Mahila Samman Saving Certificate (MSSC), which will be available for two years till March 2025. The scheme will offer a fixed return of 7.5 per cent. Deposits under this scheme can be made in the name of a woman or a girl child. The scheme will have a partial withdrawal facility as well. The maximum deposit permitted is Rs 2 lakh
Other big changes announced was doubling of the maximum investment limit under the Senior Citizen Savings Scheme from Rs 15 lakh to Rs 30 lakh besides also doubling the maximum deposit limit for Monthly Income Account Scheme offered by the post offices from Rs 4.5 lakh to Rs 9 lakh for single account and from Rs 9 lakh to Rs 15 lakh for joint account.
