Service tax charges vary across insurance product category. For, term plans it is charged @ 12.36% on the total premium amount. In case of whole-life, money back and other conventional investment cum insurance products, differential service tax rate is charged. For instance, for the first policy year, tax @ 3.09% is charged while in the consecutive years, a service tax of 1.545% applies.
In case of the new ULIP plans, a service tax @ 12.36% is charged in respect of all the charges and not on the premium amount. And in case of the health insurance, service tax @ 12.36% is applied on the total premium amount.
The claim for service tax component of the total insurance premium under section 80C is refuted by some insurers. But the department of income tax in the context states and considers any amount paid to keep the insurance policy in force as eligible for claiming deduction under section 80C.
Note: For being eligible to claim the deduction for the held life insurance policy under section 80C for any amount upto Rs. 1Lakh, the premium for the policy should not be over 10% of the sum assured. As in the other case, tax deduction can be claimed for only 10% of the sum assured value for the insurance policy.
In lieu of health insurance, a maximum amount of Rs. 15,000 inclusive of any amount paid for the preventive health care check-ups can be claimed for deduction u/s 80D. Senior citizens are entitled for an additional claim of Rs. 5000 under the section. Also, if you pay towards the health care policies of your parents, you are allowed to claim a maximum of Rs. 30,000 and Rs. 35,000 in case the parents fall in the senior citizens category.