Union Finance Minister Nirmala Sitharaman, while presenting the 2023-24 Budget, announced the removal of tax-free status for income from insurance policies with premium above Rs 5 lakh. Explaining the rationale, Revenue Secretary Sanjay Malhotra said explained that tax is not applied on insurance but on investments.

"Insurance is completely exempt, and any proceeds on death are not affected. The tax is only applied on investments beyond a certain threshold, where it no longer remains insurance but becomes an investment," he said adding that the withdrawal of relief is only for high-value investments in insurance.

As per the clarification, insurance is still exempt from tax. That is any proceeds on death of the dependent is exempted. The change is only for the investments beyond a particular point (Rs 5 lakh), where it no longer remains just insurance but it becomes more of an investment.

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The revenue secretary also spoke about the changes in the rates of the Liberalised Remittance Scheme (LRS). He said the changes are applicable only to tour packages. He explained that people do not buy tour packages from savings but from disposable savings.

For the entire discussion, watch the accompanying video

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(Edited by : Abhishek Jha)

First Published:Feb 2, 2023 8:09 PM IST