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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.

 

  1. Indirect Tax
  2. Amendments Indirect Tax for November 2016 Exams
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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 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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