How Union Budget 2023-24 impacted ULIPs, Insurance, Securities, Dividend Distribution?

In this year's union budget speech, finance minister Nirmala Sitharaman proposed major recommendation for 2023-24 for securities, insurance and tax reforms on capital gains.

The government will increase the capacity of functionaries and professionals in the securities market. SEBI will be empowered to develop, regulate, maintain and enforce norms and standards for education in the National Institute of Securities Markets and to recognize award of degrees, diplomas and certificates.

An integrated IT portal will be established for investors to reclaim unclaimed shares and unpaid dividends from the Investor Education and Protection Fund Authority with ease.

Government recorded insurance cover for 44.6 crore persons under PM Suraksha Bima and PM Jeevan Jyoti Yojana.

In the speech, finance minister stated that, "To finance the fiscal deficit in 2023-24, the net market borrowings from dated securities are estimated at Rs 11.8 lakh crore. The balance financing is expected to come from small savings and other sources. The gross market borrowings are estimated at Rs 15.4 lakh crore.

Major tax reforms

- It is proposed to tax distributed income by business trusts in the hands of a unit holder (other than dividend, interest or rent which is already taxable) on which tax is currently avoided both in the
hands of unit holder as well as in the hands of business trust.

- It is proposed to withdraw the exemption from TDS currently available on interest payment on listed debentures.

- The income from market linked debentures is proposed to be taxed as short-term capital gains at the applicable rates.

- It is proposed to provide that where aggregate of premium for life insurance policies (other than ULIP) issued on or after 1st April, 2023 is above Rs 5 lakh, income from only those policies with
aggregate premium up to Rs 5 lakh shall be exempt. This will not affect the tax exemption provided to the amount received on the death of person insured. It will also not affect insurance policies
issued till 31st March, 2023.

- It is proposed to provide a penalty of Rs 5,000 if there is any inaccuracy in the statement of financial transactions submitted by a prescribed reporting financial institution due to false or inaccurate information submitted by the account holder.

- It is proposed to extend taxability of the consideration (share application money/ share premium) for shares exceeding the face value of such shares to all investors including non-residents.

- Another proposal is to limit income tax exemption from proceeds of insurance policies with very high value, intent is to cap deductions for better targeting of tax concessions.

- The restriction on interest deductibility on interest payment to overseas associated enterprise does not apply to those in the business of banking and insurance.