Six years ago I subscribed to the HDFC Life Insurance IPO. And I got lucky! HDFC Life Insurance opened up with a nice 17% gain on first day. I sat on my luck for few years not investing much agin. It was only in the FY 2021-22 and 2022-23 that I significantly increased my allocation. In fact 88% of my investment in HDFC Life Insurance has come in last two and half years, so my investment is still very young.
Tax tweak in life insurance
This was a significant announcement in the Budget 2023.
Income from traditional insurance policies where the premium is over Rs 5 lakh will no more be exempt from taxes, Finance Minister Nirmala Sitharaman announced in her Budget speech.
Budget 2023: Tax exemption removed in insurance policies with premium over Rs 5 lakh
And this change would impact profitability of almost all the life insurance products.
The changes to tax exemption on life insurance policies announced by Finance Minister Nirmala Sitharaman in her 2023 Budget speech on February 1 are likely to have a 10-12 percent impact on the topline products of HDFC Life and a 5 percent impact on the bottomline products if nothing is done to mitigate the change, predicts Vibha Padalkar, MD and CEO of HDFC Life Insurance.
Budget 2023: Tax tweak in life insurance to dent topline 10-12%, says HDFC Life chief
And with that announcement my returns—for the first time in 5 years—became negative. I used that opportunity to invest more. In the hindsight—I think—it was a good decision. The share price has recovered and I am at 12% XIRR. Although I am still underperforming Nifty 50 Index where I would have made 16%.
Investment through the years
Returns
The dividend yield at cost mentioned in the chart above, is yield at the date at which I received the dividends. Another way to look at dividend yield is to calculate it for the fiscal year.
| Fiscal year | Dividend yield at cost |
| 2017-18 | 0.47% |
| 2018-19 | 0.57% |
| 2019-20 | 0.00% |
| 2020-21 | 0.00% |
| 2021-22 | 0.17% |
| 2022-23 | 0.17% |
| 2023-24 | 0.38% * |
To calculate the dividend yield at cost in the above table I use the below formula.
(Total amount of dividends received in a fiscal year ÷ Total amount invested at the end of fiscal year) × 100
Profit
XIRR
