Life insurers in India have reportedly asked the government to double the tax-free limit on insurance policies to INR500,000 ($5,232), according to Reuters, citing three sources directly familiar with the matter.
New tax limits were introduced in February 2023 across all insurance schemes except unit-linked insurance plans (ULIPs), which are insurance products that combine life cover with investment in market-linked funds. Following this change, inflows into non-ULIP products increased by just 2% in FY2024 and 5% in FY2025, respectively. This represents a significant slowdown compared with the 13% and 18% growth recorded in the two preceding years, data showed.
Flows for fiscal 2026 rose by 16%, driven largely by a reduction in goods and services tax (GST). Stronger inflows into these funds are expected to boost demand for ultra-long bonds, which they typically invest in heavily, at a time when supply from federal and state governments has increased. Similar requests had been made following the introduction of the new tax limits.