ULIP rules will not exempt from tax exempt

As per the provisions in the 2023 -- 24 of the 2023 -- 24 of the govt, policies where the premium is over Rs 5 lakh will no longer be tax exempt.

The income from traditional insurances where the premium is over Rs 5 lakh will not be exempt from tax exempt, according to Kapil Mehta, Co-founder, SecureNow Broker. This will hurt the interest of individuals to buy high value traditional insurances, but it will increase the focus on term plans and pure risk covers, which is good.

Mehta said that it should not result in a shift towards purely investment oriented unit link insurances.

Arihant Bardia, CIO and Co founder, Valtrust said if premium paid on policies excl. If ULIP exceeds 5 lakh in a year, then the proceeds from those policies will be taxable except in case of death benefit. Bardia said this is negative for insurance as it will impact savings products which are usually high value and margin products but not protection. Smaller policies remain unaffected. It is a negative for insurance companies as it will affect the high value premium policies - thus affecting overall industry GWP growth.

Bardia said that a similar provision was already introduced for ULIPs in 2021, wherein the aggregate premium was restricted to Rs 2.5 lakh in a year for tax exempt proceeds.

One stop solution for identity and address updating, common business identification, unified filing, and entity digilocker will make placement of insurance easier, according to Mehta. Claims payment would be facilitated.

Changes to the personal income tax will increase disposable income. This will result in individuals being able to buy better, higher value insurances to manage their risk, Mehta said.