India govt unlikely to roll back tax plan on high-value life insurance - sources
New Delhi, March 15, 2023
The Indian government is unlikely to make changes to its budget proposal of taxing the total returns on high-value life insurance policies, two government officials said on Wednesday, amid demands by insurance companies to reconsider the move.
The government, presenting the 2023/24 budget on Feb. 1, said it would scrap the tax exemption on the total returns upon maturity of life insurance policies if their aggregate premium exceeded 500,000 rupees ($6,103).
The move, which will come into effect for policies issued from April 1, has rattled insurers, with top company executives meeting Finance Minister Nirmala Sitharaman and finance ministry officials to petition them to reconsider the proposal.
"The government is not keen to revise the 500,000 rupees threshold limit as it impacts only high net-worth individuals, and not the common man," said one of the officials, who did not want to be named.
The government will, however, consider allowing these investments to be adjusted for inflation, also known as 'indexation', the official added.
The Department of Financial Services has suggested that the Prime Minister's Office allow these indexation benefits, said another government official, adding the PMO will make the final decision.
India's finance ministry did not reply to Reuters' emails and messages seeking comment. All three government officials declined to be named as the parliament is yet to pass the budget.