Tax Center

Learn more about various Tax implications on Life Insurance Policies that range from tax savings on premiums you pay to maturity benefits you receive. Goods and Services Tax (GST) and applicable taxes/ cess will be charged as notified by the Government of India from time to time.

In addition, read more on applicable Goods and Services Tax (GST) on life insurance premiums that you pay.

1.Goods and Services Tax (GST) applicable on Life Insurance Policy+

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As mandated by Government of India, Goods and Services Tax (GST) will come into effect on
1^st July 2017 and will replace the existing Service Tax and other cess levied on Insurance policies.

Here is how your Life Insurance premiums will get impacted:

Your Policy Type	Current Applicable Service Tax Rate	GST Rate Effective 01.07.17
Traditional/ Endowment Plans 1st Year Premium	3.76%	4.50%
Traditional/ Endowment Plans 2nd Year onwards	1.87%	2.25%
Term Plans, Health Plans and Riders	15.00%	18.00%
Unit Linked Insurance Plans(ULIPs)	15.00%	18.00%*
Annuity Single Premium Plan	1.50%	1.80%

* GST or applicable taxes will be deducted in the form of charges through cancellation of units.

Let’s understand this better with the help of an example,

If you have an Exide Life Secured Income Insurance Plus policy with renewal premium of ₹ 25,000 due on 20^thJuly every year.

	Pre GST (Service tax and cess till 30.06.17)	Post GST (GST effective 01.07.17)
Base Premium	₹ 25,000	₹ 25,000
Applicable Tax	₹ 467.5 @ 1.87%	₹ 562.5 @ 2.25%
Total Premium Payable	₹ 25,467.5	₹ 25,562.5

2.Other important things to know about Goods & Services Tax (GST)+

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1.What is the Good & Services Tax (GST)?

Goods and Services Tax (GST) is a location based consumption tax on goods and services.
GST works on the concept of “One Nation One Tax”. This is one of the biggest tax reforms in India since Independence and is proposed to be implemented from 1^st July 2017.
Both, Centre and State Government to levy taxes on goods and services
GST expected to replace the existing Indirect-tax structure which is plagued with multiplicity of Central and State taxes

2.What are benefits of GST?

GST is considered a progressive system of taxation; it will bring Indian taxation system in parity with the system existent in the developed countries.
Seamless input tax credit across entire supply chain and across all the States / Union Territories.
Implementation of GST is expected to substantially reduce costs especially in the manufacturing sector. The benefits of which could cascade into other sectors in the long run.
It is also anticipated to bring in more transparency, automation and simplification in tax compliance.

3.If I pay advance premium before 1^st of July, will I get an exemption under GST for current premium?

If you are paying the premium for a policy for which premium is overdue or due for payment till 30^th June 2017, then GST will not be applicable to you.
If your policy premium is due for payment on or after 1^st July 2017, which is the proposed implementation date for GST, then GST will be applicable on your premium.
In case you pay the premium in advance, the balance amount due if any, on account of GST will have to be paid after the GST implementation date.

4.Will both Service Tax & GST be charged on Insurance premiums?

No, form 1^st July 2017, only GST will be charged at the prescribed rates.

5.What type of GST is proposed to be implemented?

It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST) and that to be levied by the States would be called the State GST (SGST). Similarly Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services.

CGST: Central GST to be levied by the Centre on intra-State supply of goods and / or services

SGST: State GST to be levied by the State on intra-State supply of goods and / or services

UTGST: Union Territory GST to be levied on intra-UT supply of goods and /or services.

IGST: Integrated GST will be levied and administered by Centre on every inter-state supply of goods and services.

3. Goods & Services Tax (GST) applicable on current products+

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Plan Name	UIN	Applicable Service Tax Rate till 30.06.17		GST rate effective 01.07.17
Plan Name	UIN	First Year Premium	Renewal Premium	First Year Premium	Renewal Premium
Exide Life Guaranteed Income Insurance Plan	114N067V01	3.76%	1.87%	4.5%	2.25%
Exide Life Secured Income Insurance Plus	114N061V02	3.76%	1.87%	4.5%	2.25%
Exide Life Secured Income Insurance RP	114N060V02	3.76%	1.87%	4.50%	2.25%
Exide Life New Fulfilling Life	114N024V02	3.76%	1.87%	4.50%	2.25%
Exide Life New Creating Life Insurance Plan Regular Pay	114N072V01	3.76%	1.87%	4.50%	2.25%
Exide Life New Creating LifePlus	114N071V01	3.76%	1.87%	4.50%	2.25%
Exide Life Star Saver	114N080V01	3.76%	1.87%	4.50%	2.25%
Exide Life Income Advantage Plan	114N082V01	3.76%	1.87%	4.50%	2.25%
Exide Life One Advantage Plan	114N086V01	3.76%	1.87%	4.50%	2.25%
Exide Life Smart Term Plan	114N083V01	3.76%	1.87%	4.50%	2.25%
Exide Life Accidental Death Disability and Dismemberment Rider	114B002V02	15.00%	15.00%	18.00%	18.00%
Exide Life Critical Illness Rider	114B009V02	15.00%	15.00%	18.00%	18.00%
Exide Life Term Rider	114B007V02	15.00%	15.00%	18.00%	18.00%
Exide Life Wealth Elite¹	114N087V01	15.00%	15.00%	18.00%	18.00%

¹GST will be deducted in the form of charges through cancellation of units

4.Save Tax with Life Insurance +

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a. Your Income is Taxable

The income that an individual earns every year is subject to the Income Tax laws, as per the Income Tax Act, 1961. The Income Tax rates varies from person to person basis on different income levels, ages, and gender.

To calculate annual income of an individual, Income under the following heads are considered:-

Salaries
Income on interest earned
Income from House property
Profits and gains of business or profession
Income from other sources

Income Tax Slab- AY 2018-19

Annual Income	Income-Tax Rates
Up to 2,50,000	Nil
2,50,000 – 5,00,000	5%
5,00,000 – 10,00,000	20%
10,00,000 and 10,000,000	30%

Surcharge: 10% of income tax, where total income exceeds ₹50 lakh up to ₹1 crore.
Surcharge: 15% of income tax, where the total income exceeds ₹1 crore.
Health and Education Cess: 4% on total of income tax + surcharge.

(The above table shows the Income tax slab for Indian resident below 60 years and is subject to change)

b. You can Save tax through your investments:

Every rupee saved is rupee earned. Indian Government currently allows income tax exemptions an Individual/HUF under different heads if we invest in certain financial instruments:

Section 80C - Section 80C of the Income Tax Act allows tax exemption on up to ₹1.5 Lac of your income if invested in select instruments.
Section 80CCC - Under this section, you get tax exemption on up to ₹1.5 Lac of your income if invested in select pension products.
Section 80D - Premium paid on health insurance policies: Under this section, premium payment towards medical insurance is exempted up to ₹25,000/ for self/ family and also up to ₹50,000/- for health/medical insurance in respect of parent/ parents(senior citizens) of the assesse.
Sec 10 (10 D) - Maturity proceeds from Life Insurance policies are exempt u/s 10(10D) subject to specified conditions
80DD: Insurance Expenses of a dependent: if a person incurs approved insurance expenses for a dependent, he will get a standard deduction of 75,000 (1,00,000 in case of severe disability) from his income (provided dependent should not claim the deduction )

c. How Life Insurance Plans can help you save maximum tax:

Life Insurance Plans are one of the preferred options for tax savings as they offer protection and long term investments. , Under the Income Tax Act, 1961, life insurance plans enjoy Triple E or Exempt-Exempt-Exempt status which means exemption on investment made-exemption on returns made-exemption on maturity/life cover amount.

You can save around 30 % more by investing in life insurance plans.
Below given table illustrates the difference between investing in the financial instrument which offers tax saving on investment (80C) and on maturity amount (10 (10D) with those instruments which do not or partially offer such benefits.

Assume:

Annual Investment Amount: 1, 50,000	Investment Period: 10 years
Expected rate of return of 10% p.a.	Income Tax Rate: 30%

Following table summarizes impact on tax savings with different financial instrumentsIf You choose an instrument that offers

Particulars		No Tax Benefit u/s 80C & u/s 10(10D)	Tax Benefit u/s 80C & u/s 10(10D) (Life Insurance Plans)
Total Amount Invested	A	₹ 15,00,000	₹ 15,00,000
Amount on Maturity	B	₹ 26,29,675	₹ 26,29,675
Profit Earned	C=B-A	₹ 11,29,675	₹ 11,29,675
Tax on Profit Earned	D	₹ 3,38,902	0
Tax Saved u/s 80C Per Year	E	0	₹ 45,000
Tax Saved u/s 80C Over 10 Years	F=E* 10	0	₹ 4,50,000
Total Benefit	G=B-D+F	₹ 22,90,772	₹ 30,79,675

Apart from tax saving, Life Insurance policies offer varied benefits such as;

Life Cover: Life Insurance plans offer lump-sum amount of money for your family in case of an unfortunate events. So it is a simple answer to a very difficult question – how will your family manage financially in case something happens to you.
Long term disciplined savings: Life insurance policy offers long policy term and helps you prepare for your key life goals with discipline.
Flexibility: Life Insurance plans offer multiple features that help in adapting the solution to one’s requirements. Options in market-linked or secure returns plan, premium payment term, policy term, premium payment frequency, etc.

Calculate Tax Benefit Now

Disclaimer: Tax benefits are subject to Disclaimer: Tax benefits are subject to provisions under Section 80C, 80CCC,80D, 10(10D) and other provisions of the Income Tax Act, 1961 and are subject to amendments from time to time. The table showing Tax savings are only illustrative and may vary from person to person depending on several individual factors. We urge you to seek professional tax advice from a qualified tax consultant.