Can We Also Claim Tax Benefit for GST Paid on Insurance Premium?

By on July 11, 2019
Claim Tax Benefit for GST Paid on Insurance Premium

The amount of premium you pay for life insurance, as well as, medical insurance can be used to claim a tax benefit as per Section 80C and 80D falling under the Income Tax Act, 1961. However, with the introduction of Goods and Services Tax (GST), many are concerned about the tax benefit on the same. The amount that you pay in the form of premium includes GST. TheGST amount on your insurance premium will be calculated as a certain percentage of the total premium amount; thiscould be a significant amount. Hence, it is important to understand the amount of GST applicable to non-life, as well as, life insurance premiums.You also need to know that the GST paid on the premium will qualify for a tax benefit or not.

Can you claim tax benefitfor GST paid on insurance premium? 

Many policyholders have a concern about the possibility of claiming a tax benefit for the GST amount included in their premium. TheGST on insurance is an indirect tax and is charged by the insuranceprovideron the actual value of the service. Hence, youcan claim the total amount paid towards an insurance plan by including the GST amount as a deduction. The GST will be charged at the rate of 18 percent on health insurance. The tax exemption can be claimed as per Section 80D under the Income Tax Act, 1961 for the payment on a health insurance policy. You can claim the entire amount of GST on insurance premium for a tax deduction under Section 80D. However, the tax deduction will be subjected to a limit under the section.

It is important to note that the amount of GST will vary depending on the product. There is an18 percent GST on the basic premium amount on term insurance. A traditional life insurance plan has a 4.5 percent GST in its first year, followed by 2.25 percent in its second year. In the case of Unit-Linked Insurance Plans (ULIPs), the GST is imposed at the rate of 18 percent on several charges but is not applied to the entire premium.

When it comes to ULIPs, the investment portion will not be included in the total premium while calculating GST. The GST will not be levied on the entire premium amount but on expenses like mortality chargesand fund management charges. You can avail of an insurance tax benefit for the same.

You can deduct the amount of GST paid on the insurance premium from your income to save tax. In order to get a tax benefit on insurance, you need to keep the premium payment-related documents as proof and attach them with the income tax return.

Lastly, when you buy a term insurance policy, consider the term insurance tax benefit to avail of a tax deduction.Understand the GST amount included in your premium and include it as a part of your deduction.

ureadthis

ureadthis- is a unique platform, where you can share your latest News, Business News, Travel News, Sports News, Education News, Food making recipes and many more.

More Posts - Website

Follow Me:
FacebookPinterestGoogle Plus

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.