HDFC Life hits lowest level since May 2020; slumps 17% in two days

The government has lifted tax exemption on life insurance policies issued with aggregate premium of over Rs 5 lakh in a year (other than Ulips) with effect from April 1, 2023

Shares of HDFC Life Insurance Company hit slipped 6 per cent to hit an over two-year low of Rs 483.10 on the BSE in Thursday’s intra-day trade on the back of heavy volumes. The stock was quoting at its lowest level since May 2020.

In the past two trading days, the stock of the life insurance company has plunged 17 per cent as the Budget's proposal to tax life insurance products with annual premiums of over Rs 5 lakh may hit the insurance players' top lines by 10-12 per cent.

At 02:58 pm; HDFC Life was quoting 4.5 per cent lower at Rs 492.15 as compared to a 0.3 per cent rise in the S&P BSE Sensex. The average trading volumes on the counter jumped three-fold today. A combined 16.7 million shares had changed hands on the NSE and BSE.

The BSE today sought clarification from the insurer with reference to movement in its volume. The reply is awaited.

The government has lifted tax exemption on life insurance policies issued with aggregate premium over Rs 5 lakh in a year (other than Ulips) with effect from April 1, 2023.  

Insurance companies with higher share of non linked premium are expected to be the most impacted (as per management commentary HDFC Life could have an impact of around 10-12 per cent on topline and around 5 per cent on bottomline), ICICI Securities said.

Essentially, income from traditional life insurance policies, other than unit-linked policies (Ulip) for which provisions already exist, having premium or aggregate of premium above Rs 5,00,000 in a year will be taxed.

“This income shall be taxable under the head “income from other sources”. Deduction shall be allowed for premium paid, if such premium has not been claimed as deduction earlier”, the memorandum said. However, if the income is accrued due to the death of the insured person, then it will be exempted from taxation. CLICK HERE FOR FULL REPORT