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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.

Customer pays Insurance company directly and Insurance agent gets commission on it from Insurance Company

 

Service tax is applicable on this commission amount as follows

In case purely life insurance(no investment component)

No service tax is applicable  

In case insurance is investment cum life

Here there can be 2 cases

 

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 ins component

 

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

(NEW RATE FROM 1.6.15)

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

 

Note:-  There is reverse charge also on insurance company, hence service tax is payable by insurance company.

 

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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 12 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.