Life insurance stocks tumble as govt proposes to tax high premium policies

Govt aims to curb misuse of Section 10(10D) of I-T Act with this proposal; new rule applicable on policies issued on or after April 1, 2023

Shares of major life insurance companies tumbled on Wednesday following the finance ministers’ announcement to tax income from insurance policies having premium above Rs 5 lakh in a year, for policies issued on or after April 1, 2023.

“…over the years it has been observed that several high-net-worth individuals are misusing the exemption provided under Section 10(10D) of Income Tax Act by investing in policies having large premium contributions (as it is acting as an investment policy) and claiming exemption on the sum received under such life insurance policies,” the memorandum explaining the provisions in the finance bill noted. Section