Reacting on the update, shares of insurance behemoth LIC closed 8.38 per cent down at Rs 598.80 on February 1, while the benchmark BSE Sensex settled 0.27 per cent higher at 59,708.
Shares of insurance behemoth LIC closed 8.38 per cent down at Rs 598.80 on February 1
Finance Minister Nirmala Sitharaman on February 1 proposed that insurance policies (excluding ULIPs), where an aggregate premium is over Rs 5 lakh, maturity amount will not be exempt from tax. This will not impact the tax exemption provided to the amount received on the death of the insured person.
Reacting on the update, shares of insurance behemoth LIC closed 8.38 per cent down at Rs 598.80 on February 1, while the benchmark BSE Sensex settled 0.27 per cent higher at 59,708. HDFC Life Insurance Company tanked 10.96 per cent to Rs 515.50. ICICI Prudential Life Insurance and SBI Life Insurance Company settled 10.97 per cent and 9.31 per cent lower at Rs 402.55 and Rs 1,106.35, respectively.
Of late, HDFC Life had disclosed in their third-quarter conference call that the share of guaranteed products in policyholder AUM was about 15 per cent.
тАЬIt is proposed to provide that where aggregate of premium for life insurance policies (other than ULIP) issued on or after 1st April, 2023 is above Rs 5 lakh, income from only those policies with aggregate premium up to Rs 5 lakh shall be exempt. This will not affect the tax exemption provided to the amount received on the death of person insured. It will also not affect insurance policies issued till 31st March, 2023,тАЭ Finance Minister Nirmala Sitharaman said in her Budget speech.
Decoding the outcome of the announcement, Adhil Shetty, CEO, Bankbazaar.com said this is another incentive for taxpayers to streamline their life coverage by buying term insurance. Also, the premia are likely to remain under this 5-lakh limit with term insurance for most taxpayers. This would separate coverage from investment needs.
“This would help taxpayers get better results with both coverage and investments. Adequate coverage can be attained this way, and tax-saving investment needs can be met through a combination of small savings, provident fund, and ELSS, where the returns and liquidity may both be much better compared to traditional life covers,” Shetty said.
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.
Shivaji Thapliyal, Head of Research and Lead Analyst, YES Securities said, тАЬIt may be noted that, other than equity-oriented ULIPs, the other life insurance product that is said to have attracted the interest of HNIs is the Non-Par Savings Guaranteed product.тАЭ A non-participating insurance plan provides only guaranteed benefits to the policyholder.
While sharing his view on the Union Budget, Santosh Meena, Head of Research, Swastika Investmart said, тАЬUnion Budget was a pretty sound one from the perspective of the market. The 33 per cent rise in capex and the boost to the consumer sector from the adjustment in income tax limits were further factors that improved sentiment. The market-fearing LTCG was not mentioned. The insurance industryтАЩs only drawback is that any income from plans with premiums over Rs 5 lakh will now be subject to taxation. Overall, the budget was growth-oriented and well-balanced, encouraging private investment, increasing capex, improving exports, and encouraging consumption.тАЭ
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