Insurance Sector New Rules: As the new financial year began on April 1, there have been significant changes in various financial rules, particularly in the insurance sector. One of the most noteworthy changes is the elimination of tax rebates on a specific type of insurance premium. In addition, there have been major alterations to the limit of insurance expenses and commission. It is vital to have knowledge of these modifications, particularly if one plans to purchase a new insurance policy this financial year.
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Starting this year, customers will be required to pay more tax if they invest in policies with higher premiums. Previously, investors were not obligated to pay any tax on such policies, but now they must pay tax on premium amounts exceeding Rs 5 lakh annually. It is essential to note that Unit Linked Insurance Plans (ULIPs) have been exempted from this new income tax rule, ensuring that the benefits of tax exemption will remain available even on ULIP premiums exceeding Rs 5 lakh per annum.
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The insurance regulator, IRDAI, has altered the limit of management expenses and commission, which came into effect on the same day. IRDAI has decided to remove the commission limit on insurance agents or aggregators while changing its rules. Earlier, IRDAI proposed that the commission should be limited to 20 per cent of the total expenditure, but this limitation has been removed. Now, insurance companies can determine commission amounts at their discretion.
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With these new changes in the insurance sector, it is crucial to stay informed of the new rules and regulations. One should consider all the factors carefully before purchasing an insurance policy this financial year, particularly in light of the eliminated tax rebates and the revised limit on management expenses and commission.
