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Is GST Paid On Insurance Premiums Eligible For Claiming Tax Benefit?
After the roll out of GST since July, 2017, there has been enforced GST implication on insurance products as well. And as the GST could be a substantial value of the total premium amount to continue running a policy, here we will understand whether or not the component is eligible for claiming tax benefit similar to insurance premium which is allowed deduction as part of Section 80 C and Section 80D for health premiums.
But before this we will know the GST charges for different insurance products for better understanding:
GST charged on life insurance products
| Product | GST charges |
|---|---|
| Endowment product | 4.5% GST for the 1st year ; henceforth 2.25% of the premium amount |
| Term insurance | 18% |
| ULIP plans | 18% of GST charged on different charges such as mortality, fund management but not on the entire basic premium |
So, when it comes to making a claim for the GST paid on life insurance products, experts highlight the provision of Section 80C which states that any 'sum paid' for keeping the life insurance product running is allowed as deduction. And the 'sum paid' term covers all annuity, charges etc. charged by insurers as well as taxes being charged on annuity amount. So, the GST paid can be claimed as a deduction under the provisions of Section 80C.
But herein what needs to be noted is that the claim amount including the tax amount has to fall within the investment limit allowed in a particular section such as Rs. 1.5 lakh as per Section 80C.
So, wholly, deduction as part of Section covers both the premium amount as well as taxes paid on it.
GST charged on health products
For the health insurance plans as per the current regulations in force, a GST of 18% is charged on the basic premium.
So, similar to life insurance products, herein also deduction in relation to GST amount can be claimed but under the provisions of Section 80 D and as per the specified limits under the law. Considering thus that the obligation of the customer against the health plan will be left discharged without the payment of GST, this payment qualifies for deduction too.
In a situation when GST is not reflecting in the premium receipt
Also, the claim for GST together with the premium amount can be made as a deduction from the income for tax-saving and for this insurance premium related documents need to be kept intact as well as handy. And in a case, when there happens to be a case when the GST amount does not shows separately as part of the insurance payment, taxpayer is allowed to make a claim while filing their tax returns but for the same necessary documents such as annual statement of policy premium needs to be provided for supporting the claim.
Conclusion
So here in what matters is the provision of Section 80C and 80 D which states that any sums paid or deposited....to effect or keep in force an insurance on the life of persons specified...." and that remains binding for the policyholder who also happens to be a taxpayer.
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