Budget 2023: How experts view govt’s decision to remove tax-free status on insurance policies above Rs 5 lk
An analyst said that India still has quite low insurance penetration and there is a need to provide measures and incentives to boost that in the coming years.
As the government proposes to exempt tax-free status on some insurance policies with premium more than Rs 5 lakh, most experts see this move as disappointing and dampener. A similar reaction was also seen on Streets with respect to insurance stocks as they witness deep cut on Wednesday.
Finance Minister Nirmala Sitharaman in the Union Budget proposed "to provide that where aggregate of premium for life insurance policies (other than ULIP) issued on or after April 1, 2023, is above Rs 5 lakh, income from only those policies with aggregate premium up to Rs 5 lakh shall be exempt".
This move is a bit of a dampener for the insurance industry and for increasing penetration of insurance and household financial savings in India, Tarun Chugh, MD & CEO, Bajaj Allianz Life Insurance said.
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He added that India still has quite low insurance penetration and there is a need to provide measures and incentives to boost that in the coming years.
Without much speaking on the government’s decision to exempt tax-free status on some insurance policies, Devesh Srivastava, CMD, General Insurance Corporation of India delivered a holistic and futuristic Budget ensuring the strengthening of India’s economy.
The decision to raise the capital expenditure by 33 per cent, will shore up demand and consumption in the economy, Srivastava said, adding that this massive capex will give a boost to the reinsurance sector.
The government's decision to remove tax-free status in insurance policies can potentially have a second-order impact on salaried individuals looking for avenues for tax saving under 80C, Shivaji Thapliyal, Head of Research, YES SECURITIES said in his comment.
“Life insurers that focus on the mass market, viz. LIC and SBI Life, are said to have a relatively higher proportion of customers that approach them for tax-saving purposes and hence, could be potentially more impacted,” Thapliyal pointed out how it will impact the state-owned insurers more.
At the market close, General Insurance Corporation dipped most by over 12 per cent, followed by HDFC Life Insurance down around 11 per cent, while ICICI Prudential Life Insurance and SBI Life Insurance were each down between 9-11 per cent on the BSE today.
Similarly, insurance behemoth Life Insurance Corporation shares also tumbled by more than 8 per cent on the exchanges in an otherwise mixed market today.
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