GST on Life Insurance Policies

Not many people are aware that while buying insurance policies they need to pay GST (Good & Service Tax) along with the premium. As with most of our taxation, GST on life insurance premium is a bit complex and depends on type of policy bought.

The post tells you what rate of GST is applicable on different life insurance policies.

Term Plan – The GST on term plan insurance is 18%. If the premium is Rs 10,000 you need to pay additional 18% i.e. Rs 1,800 as GST. The 18% GST is also applicable on the premium paid on any associated riders.

Also Read: 9 Tips to Buy the Right Life Insurance

ULIPs (unit-linked insurance plans) – The GST rate for ULIPs is also 18% but its not applicable on entire premium. This GST rate is applicable on all the expenses associated with ULIPs like fund management charge, Mortality premium, etc.

Traditional Policies like endowment plans – The GST rate is 4.5% for the first year’s premium and 2.25% on all subsequent year’s premium. If you pay a premium of Rs 10,000 on your endowment plan you pay Rs 450 GST in first year and Rs 225 in all subsequent years.

Insurance Pension Plans or Annuities where you invest a lumpsum and get monthly/quarterly or annual payouts the applicable GST rate is 1.8%. In case you buy an annuity for Rs 10 Lakh, you pay a tax of Rs 18,000.  

The above GST rates on life insurance premiums would help you plan better.