The tax-saving season is here, which means both the salaried and non-salaried taxpayers would have started looking for ways to claim deductions. There are many tax-saving avenues available in the market, insurance premiums being one of them.
Under Section 80D, one can save tax based on the premiums paid on health and life policies. But, what about the Goods and Services Tax (GST) that is paid on these premiums? Can a taxpayer also claim deduction on the GST paid on these premiums?
Well, the answer is yes. According to experts, tax benefits on insurance premiums include GST. The tax saving deduction amount is, however, subjected to an investment limit available under the particular section.
When an individual pays a premium for a life or health policy, he/she is also required to pay GST, which is calculated as a percentage of the policy. On health insurance, 18 percent GST is charged on the premiums paid as per the current regulations.
The rate of calculation, however, varies from policy to policy. This effectively increases the overall premium.
According to Section 80D, a taxpayer is entitled to tax benefits under insurance policies on the entire amount paid towards the premium of the specific plan, which also includes GST. For example: if a person purchases health insurance, he/she will not only enjoy the tax advantage on insurance premium paid but also the amount chargeable after applying GST.
Tax experts advice employees to claim GST paid on premiums to reduce taxable income, and hence save tax. Employees should keep the documents related to the premium payment, reflecting GST and premium paid towards insurance policies as proof.