In Modi 3.0, Union Road Transport and Highways Minister Nitin Gadkari has written a letter on July 28 to Union Finance Minister Nirmala Sitharaman demanding removal of GST on Medical Insurance. . He has termed this tax as ‘imposing tax on the uncertainties of life’. GST on insurance increases the amount of your premium and you have to spend more. Let us know its full calculation…
So will life and medical insurance become cheaper?
At present, the Goods and Services Tax (GST) imposed by the government on life and medical insurance is 18 percent. The demand for its removal has been going on for a long time and now in the memorandum submitted by the LIC Employees Union of Nagpur Region to the Union Road and Transport Minister Nitin Gadkari, it was requested to remove it, taking cognizance of which Nitin Gadkari has sent a letter to the Finance Minister. Wrote a letter to Minister Nirmala Sitharaman demanding removal of GST. If this demand is accepted then life and medical insurance can become cheaper.
GST is levied as a financial service
The Goods and Services Tax (GST), implemented across the country on July 1, 2017, has brought about a major change in the tax system of India and since then, a single tax is levied across the country instead of separate taxes. GST is an indirect tax, which is levied on household products, clothing, consumer goods, electronics, transportation, real estate as well as services. Insurance is also considered a financial service and is included in this category. GST is levied at the same rate of 18 percent on both term insurance and medical insurance.
How does the premium cost increase?
Talking about term and medical insurance, GST is applied on the total premium amount. Consider this as an example, if you buy a medical insurance policy and its coverage is Rs 5 lakh, then the premium cost is around Rs 11,000 per year. Now if we calculate the GST charged on it at the rate of 18 percent, [11000/(100 + 18%)] That means on every premium you have to pay an additional Rs 1980 as GST and your premium becomes Rs 12,980. In this way, policy buyers purchasing health insurance after the implementation of GST have to pay higher premium amount.
Regarding the memorandum Nitin Gadkari has demanded from the Finance Minister to remove GST on insurance. In this, the Employees Union has pleaded that if a person buys an insurance policy to provide security to his family, then in that case the insurance premium should not be taxed.
15% tax before GST
Let us tell you, when GST was implemented, 15% tax was levied on insurance, but after the implementation of GST, 18% is being charged from July 1, 2017. This increase in tax rate by 3% has had a direct impact on the premiums of insurance policies, due to which the premium prices have increased.
You can avail tax benefits like this
Let us tell you here that after taking a life insurance policy, you can definitely avail tax benefits. You can claim tax deduction under Section 80C and 80D of the Income Tax Act, 1961. Taxpayers are allowed to claim tax deduction for their total premium amount paid to the insurer under specific insurance plans. That means, you can avail a deduction of up to Rs 1.5 lakh on all the insurance premiums you have paid in a year.