Can a Taxpayer also Claim Deduction on the GST Paid on the Insurance Premiums

Tax Saving Investments are an essential part of our lives since they offer tax exemption under section 80C, 80CCC or 80D as per the Income Tax Act, 1961. Keeping in mind, how important are these investments, we regularly would like to invest. Insurance Premiums are a great mode of savings tax.

Under section 80C and 80D, both life insurance and health insurance premiums can be used to get the benefits of the tax. But a major concern which affects you as an investor is, can you claim a similar tax benefit for Goods and Service Tax – or better known as GST which is being paid by you? Let us see below. Before applying for any insurance policy, you must be conscious of whether GST is applicable in your premiums and whether the GST is eligible for a tax exemption or not.

Scope of Claiming GST

The answer to the above question is tax benefits on the paid insurance premium comprise GST and hence you can get an exemption on the same according to the limit available. Moreover, section 80C and 80D of the Income Tax Act specifies that taxpayers can claim deductions for the entire or complete amount which is being paid to the insurer for the insurance policies.

What are Goods and Service Tax -GST?

GST, an indirect tax, imposed on the supply of goods and services. This law came into the picture in July 2017 and has substituted several indirect tax laws that formerly were there in India. The tax is charged at every point of sale by the provider of any kind of goods and services from the receiver with the real value of the service. Hence, a joint interpretation of income tax and GST rules would be in resonance to the paid sum to the insurer with appropriate GST that would be allowable as a deduction.

GST in Health Insurance

According to the law of GST, 18% is being charged for all health insurance premiums and you can claim the premium amount under Section 80D of the Income Tax Act. Let us take two examples for a better view of the same.

For example, Mrs. Mou Dasgupta- a 30-years old lady has bought for a Health Insurance Plan named MY Health Suraksha Plan by HDFC Ergo Insurance with a sum assured of INR 5 lakhs. She would have to pay the basic premium of INR 10226 with GST of INR 1841. Hence, the total premium stands at INR 12067.

On the other hand, if her spouse Mr. Santanu Dasgupta, a 40 years old person has bought the same plan with a similar sum assured, he will pay INR as the basic premium of INR 12080 with an extra amount of GST as INR 2174. Thus, the total premium will be INR 14254.

In both the above cases, a considerable amount of GST which is valid to the basic premium, can be claimed by both of them to get a tax exemption under Section 80D. Both Mr. and Mrs. Dasgupta will be eligible to claim the total premium INR 14254 and INR 12067 respectively.

GST in Life Insurance

The GST percentage under Life Insurance will vary from one person to the other dependent on the product chosen. For example, the term insurance has 18% GST on its basic premium, however, the traditional endowment insurance plan carries a 4.5% GST for the 1st policy year and 2.25% from the 2nd policy year. In Unit Linked plans, the 18% GST does not apply to the entire premium, but the same is imposed on the several charges that an investor pays like a mortality charge and a fund management charge.

What happens if GST is not showing in your premium receipt?

For claiming a tax exemption, insurance premium receipts are a must which acts as a proof of investments. However, there can be situations, where you might not find the GST amount separately in the premium receipt. In this case, you can claim the amount of GST while filing your income tax return,

Conclusion

Make investments wisely and make sure you are claiming the GST as well along with your base insurance premiums.