MUMBAI: Indian life insurers have asked the government to double the tax-free limit for insurance policies from 500,000 rupees ($5,232), hoping for a boost to inflows into these funds, three sources directly aware of the matter said. New tax limits were imposed in February 2023, applicable to all insurance schemes except unit-linked insurance plans (ULIPs). Since then, inflows into ‌non-ULIP schemes have ⁠risen ⁠a modest 2% and 5% for fiscal years 2024 and 2025, respectively. This is sharply lower than the 13% and 18% growth in the previous two years, data showed. The flows for fiscal 2026 grew 16%, largely due to a reduction in the goods and services tax. Stronger inflows into such funds will boost demand for ultra-long bonds - which these funds heavily invest in - at a time when the federal and state ⁠governments' supply ‌has risen, the sources said, declining to be identified as they are not authorised to speak to the media. Similar requests had been made after ⁠new tax limits were imposed. The Life Insurance Council and the Insurance Regulatory and Development Authority of India did not reply to a Reuters email seeking comment. Slower inflows have curbed demand for longer-maturity debt, along with pushing up yields on 30-year and above maturity papers, faster than the 10-year note. The Indian government has reduced the share of ultra-long bonds in April-September borrowing to 25%, sharply lower than 30% for the second half of fiscal 2026 and ‌35% for the preceding six months. It would be difficult to maintain supply at this level, and the government will have to increase it to at least 30% in October-March, according ⁠to traders. "Increasing the tax exemption limit is a necessary first step to unlock the deep pool of long-term capital required to anchor India's fiscal expansion," said Arun Srinivasan, chief - fixed income, ICICI Prudential Life Insurance. "Implementing this measure will incentivise long-term retail and institutional savings, offering critical domestic support for the state's ultra-long-term borrowing needs," he said. The appeal was made via a letter from the Life Insurance Council, a forum which represents insurers, to the government earlier this month, the sources said.