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There are different kinds of life insurance plans

Some are purely life insurance and some have some investment cum life insurance.

Service tax is applicable on Premium amount as follows

 

A In case purely life insurance(no investment component)

No service tax is applicable

B In case insurance is investment cum life

 

Here there can be 2 cases

a)Amount of premium which is payable for life and that payable for insurance is separately intimated to policy holder by Insurance Company

Service tax is applicable on investment component only, not applicable on life insurance component

b)Amount of premium which is payable for life and that payable for insurance is not separately intimated to policy holder by Insurance Company

Service tax is payable

@ 3.5% of gross premium charged in first year and 1.75% during next year +Swachh Bharat Cess+Krishi Kalyan Cess

Year

% of base fare  (OLD RATE)

Effective Rate of  Service tax

Effective Rate of

Swachh Bharat Cess

Effective Rate of  Krishi  Kalyan  Cess

Total  Rate of  Service  Tax

First Year

3%

3.5%

0.125%

0.125%

3.75%

Next Year

1.5%

1.75%

0.063%

0.063%

1.88%

(NEW RATE FROM 1.6.15)

(Earlier,the rates were @ 3% of gross premium charged in first year and 1.5% during next year)

 

New Amendment

For Single Premium Anuity Insurance Policies,

Insurance Premium is to be paid only in first year and not after that

 

In this case,

Rate prescribed are 1.4% of Total Premum Charged++Swachh Bharat Cess+Krishi Kalyan Cess

i.e. 1.5%

Year

% of base fare

(OLD RATE)

Effective Rate of  Service tax

Effective Rate of

Swachh Bharat Cess

Effective Rate of

Krishi  Kalyan  Cess

Total  Rate of  Service  Tax

First Year

(Single Premium)

N/A

1.4%

0.10%

0.10%

1.5%

Next Year

N/A

N/A

N/A

N/A

N/A

This is applicable only where the amount allocated for investment or savings on

behalf of policy holder is not intimated to the policy holder at the time of providing of service


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  1. Service Tax
  2. Valuation of Taxable Service
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About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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