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It is well known fact that premiums paid for life and health insurance give tax benefits u/a 80C and 80D respectively. But it is not known by the people that you can also claim deduction on the GST paid on these premiums. Yes , that’s right ..!!!
You pay GST based on your premium amount . In this article , we will cover very common type of insurance which most of the people opt for .
1. Health insurance
GST rate is 18% for health insurance policies. So on the premium of ₹10,000 /- GST @18% will be ₹1,800/- , so , you will end up paying a total premium of ₹18,000/-.
This ₹1,800 GST can be claimed as deduction u/s 80D along with ₹10,000.
2. Life insurance
In case of life insurance, GST is levied on different parts of the premium, depending on the type of policy you are buying. You are allowed to claim deduction against GST paid on the premium, but within the overall limit of ₹1.5 lakh available u/s 80C.
In case of a term plan, GST is levied @18% on the entire premium of the policy. So, the total premium paid with GST will be eligible for tax deduction. In the case of unit-linked insurance plans, which offer a combination of insurance and investment, GST is only levied on the charges, including premium allocation, policy administration, fund management and mortality charges. No GST is levied on the investment part.
In the case of endowment plans, which is an combination of insurance and investment, GST is levied only on 25% of the total premium in the first year of the policy, which effectively reduces the GST rate to 4.5% of the premium paid in that year. In all subsequent years, GST is levied on 12.5% of the total premium paid, which effectively reduces the GST rate to 2.25% for the rest of the period.
So , be careful to take GST amount as a deduction while submitting your investment details to your employer .