From July 1, 2017 the Indian government introduced what it is been called the biggest tax reform in India after the independence, the Goods and Services Tax (GST). It is claimed to have a positive impact on our economy; but as far as the life insurance in India is concerned, the tax has been increased from 15% to 18%. This would mean a higher premium for the existing or a future life insurance plans. To understand the effect of GST on life insurance policy, we will have to dig a little deeper as it is much more than an increased premium.
Effect on the consumers:
As the consumers are the ones buying the life insurance policy the ultimate burden of an increased tax slab will be borne by the consumers. The value of supply of services in relation to the life insurance policy will be:
- The gross premium minus the amount allocated for investment, or savings on behalf of the policyholder, if such amount is informed to the policyholder.
- Single premium annuity policies: 10% of the premium
- All other cases: 25% for 1st year and 12.5% for 2nd year onwards on the premium charged.
- GST @ 18% will apply if the whole premium is for life insurance in India.
- Health insurance plan: Due to the introduction of GST, health insurance plan will attract a tax of 18% from the previous 15 %.
- Term plan: At present service tax of 15 % is levied on term plans, which after GST has increased to 18%.
- ULIP plans: At present, service tax of 3.5 % is levied on protection part of ULIPs in the first year and 1.75% from second year onwards. This would go up to 4.5 % in the first year and 2.25% from second year onwards.
- Endowment plans: Currently, endowment plans attract a service tax of 3.75% on the premium in the first year of the policy and will rise to 4.5% in the first year under the new tax regime. As of now, 1.88% of the service tax is levied on endowment plan’s premium for the second year, which is expected to rise to 2.25 % from the second year onwards after the implementation of GST.
Even after the GST, Edelweiss Tokio’s life insurance plans provide you with total protection from up to 35 critical illnesses at a cost effective price so that the increased service tax doesn’t come in your way of protecting your family. You can also avail various tax benefits under Section 80C.
Know More About Edelweiss Tokio Life Insurance: https://www.edelweisstokio.in