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In a major relief, the government has clarified that existing policyholders paying annual premium of over Rs.5 lakh across life insurance policies other than ULIPs will continue to be exempted from taxation on maturity proceeds.
The new taxation norm will be applicable on policies issued on or after April 1, 2023, clarified the government.
In an explanation, the government said, “The proposed provision shall apply for policies issued on or after 1st April, 2023. There will not be any change in taxation for policies issued before this date.”
In Budget 2023, the Finance Minister has proposed that it would do away with the tax-free maturity proceeds on high value insurance policies. Investors paying premium of over Rs.5 lakh to buy life insurance policies other than ULIPs will have to pay tax on their maturity proceeds. However, if such a policyholder dies then the maturity proceeds for the nominee will be tax free, clarified the government.
Remember, premium paid towards term insurance, whole life, money back and endowment will be considered to arrive at total premium payment. Also, the premium calculation will be done at PAN level.
