New income tax rules: Proceeds from life insurance policy to tax-free income — changes from 1st April that you must know

New income tax rules

New income tax regulations for 2023: Beginning on April 1, 2023, a number of income tax regulations will change. These income tax regulations have altered as a result of the recent passage of Finance Bill 20223 by the parliament, which was based on ideas from the Union Budget 2023. This Finance Bill will make income tax policy proceeds over the yearly premium of 5 lakh rupees taxable starting on April 1, 2023, or tomorrow. Hence, not all life insurance policy proceeds will be subject to taxation. From the following fiscal year, only life insurance proceeds with yearly premiums of exceeding 5 lakh will be subject to taxation.

When presenting the Union Budget 2023, Union Finance Minister Nirmala Sitharaman suggested imposing a tax on the proceeds of life insurance policies with annual premiums exceeding 5 lakh “It is proposed to stipulate that only those policies with aggregate premiums up to 5 lakh will have their income exempted in cases where the total premiums for life insurance policies (other than ULIP) issued on or after 1 April 2023 exceed 5 lakh. The tax exemption granted to the sum paid upon the insured person’s death will not be impacted by this. Also, it won’t apply to insurance contracts issued after March 31, 2023.”

Finance Minister Nirmala Sitharaman included an income tax on ULIP (Unit Linked Insurance Plan) earnings for annual premiums beyond 2.5 lakh in the Union Budget 2022. As a result, beginning on April 1, 2023, the proceeds from ULIPs with annual premiums up to 2.50 lakh rupees and life insurance with annual premiums up to 5 lakh rupees will be exempt from income tax.

Several additional income tax law changes will take effect on April 1st. Starting tomorrow, earning individuals will be subject to the new income tax slab by default. An earning person must now choose the old tax system if they want to stick with it.

The old and new income tax regimes both retain the standard deduction of $50,000.

As on 1 April 2023, the annual tax-free income for salaried individuals will increase to 7 lakh rupees.