Life insurance companies plan strategy tweak to offset tax impact

Union Budget has proposed to tax high-value policies with premium aggregating to Rs 5 lakh per year to plug arbitrage that HNIs are using to get tax-free returns on policies through Section 10(10D)

Life insurers are considering changes in business strategy to offset the possible impact of the proposed tax on high-value policies even as they wait for some relaxations from the government.

The Union Budget 2023-24 has proposed to tax high-value policies with premium aggregating to Rs 5 lakh per year to plug the arbitrage that high-net worth individuals (HNIs) are using to get tax-free returns on policies through Section 10(10D).

The industry, however, feels the classification of HNIs — aggregate premium over Rs 5 lakh per year — is a matter of concern because most who invest in the non-ULIPs are