Insurance Premium with Goods & Services Tax- A complete guide

If you are planning to buy the best life insurance, best health insurance, or the best term plan, you must have already researched settlement claims and benefits. Do you know? GST on your purchase may impact your total payment. 

The GST has changed the taxation of insurance premiums in India, which was introduced in 2017. For consumers seeking the best health insurance in India, the best life insurance in India, or the best term plan in India, understanding the effect of GST is essential for informed financial planning. PureBima dissects what you should know about GST on insurance premiums and how it will affect your insurance policy decision-making in this blog.

The rate of Goods & Services tax on insurance

GST rates are different for various insurance products. 

If you're purchasing the best term plan, which is a pure risk product, you pay 18% GST on the premium. The same 18% rate applies to most best health insurance policies.This tax is imposed on the base premium, and it is paid by the policyholder. When searching for the best term plan in India, it’s crucial to check if the price shown includes GST or not.

How is the Policyholder Impacted?

Let us understand through an example. You choose the best life insurance policy with an annual premium of ₹25,000. In case of a pure term policy, you will pay 4500 as GST, which will take your total outgo to 29500.

Then, multiply it by twenty years and the inflation rate. For customers evaluating the best life insurance in India or the best health insurance in India, PureBima advises factoring in GST from the start to avoid surprises during payment.

How is the Policyholder impacted by health insurance?

Health insurance is a renewable scheme, so the 18% GST is payable year in, year out. This additional tax burden is even greater in the case of people buying family floater plans or critical illness riders. Also, if you’re selecting the best health insurance in India with OPD or wellness features, your premium (and thereby GST) may be higher. That does not imply that the product is worth less; it is only that, full premium (including tax) needs a budget.

Are you eligible for tax benefits over GST paid?

The silver lining: Your complete health insurance premium, including GST, can now be deducted as per Section 80D of the Income Tax Act (up to Rs. 25,000-1,00,000 based on age and policy).

But in the case of life insurance (Section 80C), the basic premium will only be taken into consideration when making the deduction and not the GST amount. If you’re buying the best life insurance in India, keep in mind that a portion of what you pay (GST) may not reduce your taxable income.

PureBima is an insurance solution provider. Whether you're comparing the best health insurance, best life insurance, or the best term plan, it’s vital to understand how GST affects the premium and claim eligibility.

PureBima not only helps you in making an informed decision by comparing policies, but also by enabling you to become aware of the financial framework of the policies. Any type of tax-efficient planning requires long-term protection against all events; therefore, it necessitates both the premium and the associated taxes.