Budget 2023 | Maturity proceeds of life insurance policies with annual premium of over ₹5 lakh to be taxed: Finance Minister
The Hindu
The proposed change will not affect insurance policies issued till March 31, 2023, the Finance Minister said
An individual will have to pay tax on the maturity amount of life insurance policies where the aggregate annual premium exceeds ₹5 lakh, according to the Union Budget proposal presented on February 1.
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 ₹5 lakh shall be exempt.”
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This will not affect the tax exemption provided to the amount received on the death of a person insured. It will also not affect insurance policies issued till March 31, 2023, she said.
Nidhi Manchanda, Certified Financial Planner, Head of Training, Research & Development at Fintoo, said that one of the major setbacks that are given in the finance bill is related to the taxability of the maturity proceeds of a life insurance policy.
As per the Budget proposal, maturity proceeds of all life insurance policies (other than unit-linked insurance policies or ULIPs) that are issued after April 1, 2023, and have an annual premium of more than ₹5 Lakh will now be taxable.
"One should note that if an individual has more than one life insurance policy, which is issued on or after the 1st of April 2023 and also if the aggregate amount of premium of such policies exceeds ₹Rs 5 lakh, then the maturity amount will be taxable," Ms. Manchanda said.
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