According to two government sources on Wednesday, despite requests from insurance companies to review the proposal, the Indian government is not expected to amend its budget proposal that would tax the total profits on high-value life insurance products.

The government, presenting the 2023/24 budget on Feb. 1, said it would scrap the tax exemption on the total returns upon maturity of life insurance policies if their aggregate premium exceeded 500,000 rupees ($6,103).

The decision, which would be in force for policies issued starting on April 1, has alarmed insurers, prompting senior corporate executives to meet with Nirmala Sitharaman, the minister of finance, and other ministry representatives to request that they reconsider the plan.

However, the person continued, the government will look into enabling these investments to be "indexed," or adjusted for inflation.

Another government official stated that the PMO will make the ultimate decision, but that the Department of Financial Services has recommended that the Prime Minister's Office approve these indexation benefits.

Reuters' emails and messages for comment from the Indian finance ministry received no response. Since the budget has not yet been approved by the parliament, all three government officials declined to be identified.

Indexation is the process of adjusting a purchase price to the cost inflation index (CII), which is regularly released by the income tax department.

Indexation will reduce the policyholder's tax obligation if it is permitted, according to independent tax analyst Kuldip Kumar.

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