"It is taxing savings and will impact our business," says Max New York Life Insurance CEO and managing director Tony Singh.

Though Sinha had made the announcement that the government has not clarified about how or on what the tax will be applied, it should be noted that the premium paid by a policyholder has several components like contribution to mortality, savings and insurer overheads, private life insurers say. Similarly life insurers make a distinction between the renewal policy and the first-year premium.

The government, they add, did not specify on what component of the premium the tax would be applied to whether only on the first year premium or on the insurers total premium income. Similarly, it is not clear whether the tax will have to be paid on the whole premium or on the mortality component.

"We are not agreeable even for restricting the tax just on the first-year premium," says Singh. "I any country if such a tax is levied, policyholders can offset the same under different provisions of tax laws a facility that is conspicuous by its absence in India."