Insurance stocks nose-dived after the budget session on Wednesday on the back of demand concerns. The shares of HDFC Life Insurance closed 10.79% lower on the bourses. Similarly, the shares of SBI Life Insurance Co. dropped by 8.61% to close at Rs 1,114.50.
The stock of the nation’s largest life insurer Life Insurance Corp. of India also ended in red, losing 8% value for its investors. Max Financial Services and PB Fintech closed down 10.07% and down 6.64% respectively.
The Dalal Street reacted to the FM’s speech bringing down the prices of the insurance stocks as investors exited their holdings. She highlighted two points concerning the insurance sector.
In her budget speech, Sitharaman stated that income or maturity proceeds from all life insurance policies (except unit-linked insurance plans or ULIPs) with annual premiums of over Rs 5 lakh will be taxable from now on. This makes high-value insurance policies lesser appealing to customers.
Furthermore, the budget stated that the new regime will become the default one with rebates making income up to Rs 7 lakh tax-free. This push for the new tax regime decreases the lustre of insurance policies as tax-saving mechanisms.
Nidhi Manchanda, a Certified Financial Planner, “One should note that if an individual has more than one life insurance policy, which is issued on or after the 1st of April 2023 and also if the aggregate amount of premium of such policies exceeds Rs 5 lakh, then the maturity amount will be taxable.”
Written by Vikalp Mishra
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