Claiming GST on Your Life Insurance Premiums: Is It Possible?

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A quick and easy way to ensure that your loved ones are secure and protected when you are no longer present is to buy life insurance online. According to the provisions of Sections 80C and 80D of the Income-tax Act, taxpayers may submit claims for deductions on the total sum that was paid as premiums for certain plans. As per Sections 80C and 80D of the Income Tax Act, a person paying a premium on life and medical insurance policies might easily use them to claim tax benefits up to Rs. 1,50,000 and Rs. 25,000 per year, respectively. 

However, it is still being determined if a taxpayer can claim a tax benefit of a similar sort for the GST that he pays on insurance premiums.

Typically, the GST paid on the premium is included in the net amount paid by the taxpayer when purchasing a life or medical insurance policy. Any insurance bases computed as a percentage of the premium have a fixed GST. The GST tax payment made at one point can be a sizable sum. Knowing the amount of GST that applies to life and non-life insurance premiums, as well as whether the GST that is paid with the basic insurance premium qualifies for tax benefits, should therefore be a source of concern and curiosity.

Specific taxpayers may deduct the full amount paid to the insurance firm for specific insurance schemes under Section 80 (80C and 80D) of the Income-tax Act. As an indirect tax, GST is levied or recovered by the service provider from the customer based on the actual value of the service. The total amount paid to the insurance firm, including any applicable GST, would therefore be eligible for a deduction under both the income tax and the GST rules, per a collective reading of both.

GST on Health Insurance

The premium for health insurance is subject to an 18% GST charge per current rules. However, tax benefits on the premiums paid for health insurance policies or critical illness riders in life insurance may be claimed under section 80D of the Income Tax Act.

Providing an Example to Explain.

Consider the scenario when a person purchases a health insurance policy from any insurance provider at the age of 30 with a Rs. 10 lakhs sum insured. The required premium would be Rs 7,843 plus GST of Rs 1,412 (18% GST is added to the basic premium), for a total premium of Rs 9,255. In the alternative, if a person over 50 purchases the same policy, he must pay a standard premium of Rs 17,782 and GST of Rs 3,200. The total amount of the premium due is Rs 20,983.

Therefore, the amount charged as GST applicable to the basic premiums in both circumstances mentioned above may be claimed to qualify for a tax deduction under section 80D. Therefore, under section 80D, we might claim a cumulative premium of Rs 9,255 or Rs 20,983 in both circumstances. The investment cap stated under a certain section of 80D determines the tax saving deduction amount.

GST on Other Products 

Depending on the product that you bought, the GST varies. For example, the base premium for term insurance has a GST rate of 18%, while the GST rate for traditional endowment insurance is 4.5% for the first year and 2.25 % for the second. In addition, a GST of 18% is assessed on various types of charges for the regular premium of unit-linked insurance plans (ULIPs). 

ULIPs combine investment and insurance. In these cases, the investment portion is not included in the gross premium for determining GST. As a result, a GST of 18% is set to be charged on various fees that an investor must pay, such as fund management fees and mortality fees, rather than the entire premium.

Understanding through a Quoted Example

Customers must pay a basic premium of Rs 15,000 and a GST of Rs 2,700 if they purchase a term insurance plan with a policy term of 30 years and a guaranteed sum of Rs 2 crore. The total premium, Rs 17,700, is admissible under section 80C. The amount of the tax savings deduction is directly proportional to and heavily influenced by the investment cap outlined in the relevant section.

What Should I Do If My Premium Receipt Doesn’t Show GST?

To save on taxes, the employee may deduct both the premium payment and the GST that he paid on the insurance premium from his income. The taxpayer should keep documents pertaining to premium payments, including proof of the premium and GST paid.

Now that you have all these aspects in mind explore available plans and use life insurance calculators for chalking out your future financial goals. 

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