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What is the story about?
The issuance of new life insurance policies in India has declined following the removal of tax deduction benefits under the new tax regime, according to a report by news agency ANI quoting former HDFC Chairman Deepak Parekh.
Parekh said that earlier growth in life insurance was significantly supported by tax incentives, which allowed policyholders to claim deductions on premiums.
“Insurance was growing rapidly because the amount of premium you paid was allowed as a deduction from your income. But now that benefit is removed, new insurance policies have come down,” he said, as per the ANI report.
The new tax regime, which became the default system from April 1, 2023, has done away with key exemptions such as Section 80C benefits on life insurance premiums and Section 80D deductions on health insurance.
Under the revised framework, maturity proceeds from policies issued after April 1, 2023, are taxable if annual premiums exceed ₹5 lakh, although death benefits remain exempt.
Despite the slowdown in new policy sales, Parekh noted that life insurance continues to play a critical role in household financial planning.
“It is a savings product and a must for every family because life is uncertain. If something happens to the breadwinner, the policy provides financial support,” he said, according to ANI.
He also highlighted broader shifts in savings behaviour, pointing to the rising popularity of systematic investment plans (SIPs), which are drawing a larger share of retail investments.
Parekh said that earlier growth in life insurance was significantly supported by tax incentives, which allowed policyholders to claim deductions on premiums.
“Insurance was growing rapidly because the amount of premium you paid was allowed as a deduction from your income. But now that benefit is removed, new insurance policies have come down,” he said, as per the ANI report.
The new tax regime, which became the default system from April 1, 2023, has done away with key exemptions such as Section 80C benefits on life insurance premiums and Section 80D deductions on health insurance.
Under the revised framework, maturity proceeds from policies issued after April 1, 2023, are taxable if annual premiums exceed ₹5 lakh, although death benefits remain exempt.
Despite the slowdown in new policy sales, Parekh noted that life insurance continues to play a critical role in household financial planning.
“It is a savings product and a must for every family because life is uncertain. If something happens to the breadwinner, the policy provides financial support,” he said, according to ANI.
He also highlighted broader shifts in savings behaviour, pointing to the rising popularity of systematic investment plans (SIPs), which are drawing a larger share of retail investments.
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