New Delhi: In the Union Budget 2023-24, Finance Minister Nirmala Sitharaman announced removal of tax exemption on insurance policies with aggregate premium above Rs 5 lakh. The move is aimed at reducing or cutting income tax exemption on proceeds of insurance policies with premium value.
However, this has given insurance companies & brokers a chance to make their sales pitch to customers, on how to bypass the new Budget provision and can still avail benefits of a policy with tax exemption.
A leading daily reports that some agents are making last-minute pitch to investors for purchasing policies with high premium, so that they could take advantage of tax-free maturity from these investments.
Notably, the sale in insurance policies usually registers an uptick around the closing of financial year as many working professionals invest in Fixed deposits/insurances policies to avail benefits of tax exemption, in their income tax returns.
Why buying high-premium policy will be a mistake
Whatever announcements that Finance Minister made in Budget 2023-24, that will be applicable from April 1, 2023.
Hence, if you fall into trap of insurance agents and their big promises, you will be making a big mistake.
In her Budget speech, FM Sitharaman clearly said that maturity from traditional insurance policies, issued on or after April 1, 2023, with premium above Rs 5 lakh, will not be exempted from tax.
It’s important to note that the new rule will not affect & have any bearing on the policies issued before March 31, this year.