GST rates applicable on Insurance policies
Hemlata Khandenwal / 2020-05-30 09:22:22

How does GST apply to the LIC life insurance policy?

Nowadays everyone is familiar with the definition of insurance. And people take insurance for the safety of tomorrow and for the safety of their lives. So, that they do not have to face any trouble in the coming time; especially after retirement. Many types of insurance are also done in insurance, on which there is GST is payable. Let us know those types of insurance with tax benefits.

Thus, going with the best life insurance plan to protect your future keeps you from paying a little bit of your regular savings to meet sudden urgent needs during your emergency. So to choose a suitable insurance plan, you have to know the insurance plans of LIC. And have to know the GST taxes applicable to LIC insurance premiums. Learn about all insurance plans with legal salaah. 

1. Health insurance policy

2. Life insurance policy

What is required for a life insurance policy?

Currently, a LIC Life Covered Government Managed Investment Fund has its advantages. In breaking current adverse conditions and health conditions, no one can say a word. Subsequently, social security benefits have become essential for everyone today, especially in times of crisis. In case, there is a certain danger or certain disease situation, the LIC life insurance regime ensures the welfare of the families of the affected people.

What is the applicable GST to the life insurance business?

As per GST law, GST applies to all insurance services, except only those services which are involved in the self-insurance business. In that case, GST is applied to the recipient based on RCM. Life insurance companies must compulsorily register GST and it is assumed that GST will be levied on general insurance as well as insurance services. Further, as per Section 24 (vii) of the CGST Act 2017, all insurance agents should have GST registration. The GST rate of 18% applies to the commission earned by the insurance agent.

What is the applicable GST on health insurance?

GST on health insurance

The premium for health insurance is currently 18 percent GST. Tax benefits can be claimed on payment made for health insurance policy under section 80D.

For example, suppose you have got health insurance of Rs 10 lakh from Bajaj Allianz General Insurance Company at the age of 30 years. For this, you have to pay a basic premium of Rs 7,843 and GST of Rs 1,412 (18 percent GST on basic premium). In this way, you will have to pay a total of Rs 9,255 as a premium. In this case you can claim tax benefit on the total amount paid i.e. Rs 9,255 instead of the premium amount of Rs 7,843. However, the condition is that this amount is within the scope of the investment limit under the relevant section.

Tax benefits on GST paid on Life Insurance

Like health insurance, the tax benefit can be claimed on GST paid on the premium of life insurance. That is, the tax benefit can be claimed under section 80C on the amount of premium as well as GST on it.

What is the GST applicable to insurance premiums?

GST on insurance premium

GST on insurance premium ranges from 2.5 percent to 18 percent. That is, you have to spend a significant additional amount in the form of GST while depositing the premium. According to experts, the tax benefit can be claimed on any charge on this GST or on premium.

The rate of GST on insurance premiums varies and depends on the nature of the insurance. For example, the basic premium for health insurance is 18 percent GST. It can be claimed as a tax benefit under 80D. Similarly, term insurance and ULIPs also attract 18 percent GST. However, traditional schemes such as endowment policies, money-back policies, whole life policies, and pension products attract a GST of 4.5 percent on first-year insurance premiums. From the second year onwards, the rate of GST on premiums decreases to 2.25 percent.

How does GST apply to interest on the deferred premium?

If you have delayed the payment of premium, then naturally any late fee will be charged. GST will be levied on the interest charged on late fees. In this case, there is no fixed GST rate. The rate of GST on interest charged on late fees depends on the type of premium paid.

How does GST apply to capital dividend account fees?

A capital dividend account is a type of account that a company opens to its shareholders. Regular payment of dividends is made to all shareholders towards their CAPITAL DIVIDEND Account. Therefore, companies also provide insurance for the Capital Dividend Account. Here, on the capital dividend's account insurance premium, GST will be applicable at 18%. The capital dividend account fee also includes postage charges. Obviously, GST registration with a company providing capital dividend account insurance will be mandatory.

What should a person do if GST is not mentioned on the premium receipt?

Most companies do not mention GST on premium receipts. Only the premium amount is mentioned on the receipt. In such a situation, the taxpayer should preserve the document related to the premium payment. This document can be used as proof of premium amount and GST. Based on this document, the taxpayer can claim tax benefits on GST in addition to premiums. Obviously, he should save the document related to the insurance payment.

Also, read about The utilization of Input Tax Credit for Demand payment

How long was GST collected from insurance policyholders?

The GST paid by the policyholders on LIC insurance premium should be recovered in some cases. Cases of refund of GST given on insurance premium are as follows: -

1. GST on certain charges paid by policyholders like Change fee or any quote fee.

2. Any fake insurance premium

3. GST was levied on the charges levied in the case of giving written acknowledgment for receipt of notice of assignment.

4. Other than the GST at the time of cancellation of LIC life insurance policy.

5. GST applies if there has some change in nomination in other words' names of the insured.

However, on all the above cases, the rate of GST will depend on the type of LIC life insurance policy. The insurer is obliged to make registration with GST compulsory despite conducting business in the previous financial year under any circumstances.

So, these are the ground rules of GST applicable to LIC life insurance services and tax benefits of GST paid on insurance policies. Now you can choose the right LIC life insurance policy cleverly.

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