Claim tax deduction for GST paid on insurance premium

Claim tax deduction for GST paid on insurance premium – The Financial Express

Claim tax deduction for GST paid on insurance premium – The Financial Express
NewsColony

By Kapil Rana

Under Section 80C and 80D of the Income Tax Act, 1961, taxpayers are allowed to claim tax benefit on premiums paid for life insurance and health insurance plans. This helps to promote the habit of investing in an insurance policy among people. While most people are aware of the tax benefit on premiums paid for insurance, they are unfamiliar with a similar benefit for GST paid on insurance premiums. In other words, taxpayers can avail tax benefit on insurance premiums as a whole, including the GST paid as per the policy.

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Before buying an insurance policy, it is important to compare prices across various policies. On top of the cost-specific elements of insurance premium such as mortality amount, the insured person also needs to pay Goods and Services Tax (GST). The applicable GST rate will depend on the type of insurance policy that you have chosen.

Benefiting from tax exemption on GST
A person who avails services from a supplier is liable to pay GST along with the actual value of the service. A taxpayer can claim tax benefits under Section 80C and 80D on the entire amount paid as premium for the continuation of an insurance policy. Since the policy would cease to be active without the payment of GST, a taxpayer can automatically claim the entire amount, including GST as tax deduction under insurance policies. Make sure that you keep the documents related to premium payment, showing both GST and premium paid towards your insurance policy as a valid proof.

The amount paid as GST qualifies for tax exemption subject to the limit available for investment under a particular section. For instance, let’s consider a person A has a life insurance plan with an annual premium of Rs 10,000 to which a GST of Rs 1,800 is levied. Hence, the total premium comes to Rs 11,800, which can be claimed as tax deduction under Section 80C for premium paid towards an insurance policy. Similarly, if a person B has a health insurance policy with an annual premium of Rs 8,000, he will pay GST of Rs 1,440. The total premium comes to Rs 9,440, which can be claimed as a tax deduction under Section 80D.

In spite of increasing the overall price of insurance policies, GST has increased the competition among insurance companies. In order to attract new buyers, insurers are taking various steps such as lowering prices by minimizing expenses pertaining to policy and other similar factors that add up to the total cost of the policy. Moreover, to stand out from other competitors, insurance providers might start adopting technological advancements to simplify the process of purchasing insurance policies or filing of claims.

Altogether, the implementation of GST has been beneficial for buyers, who limited their criteria to pricing while making the decision to buy an insurance policy. The proper use of technology can allow an insurance buyer to pick the right insurance plans, be it health or term insurance plan that offers protection to your loved ones against any unprecedented events.

The writer is chairman & founder, HostBooks Limited

Do you know What is ? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

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