GST Rate For LIC Policies

GST rates is levied on the premiums paid for insurance policies. The amount varies across different types of insurance product offerings. The premiums that you are charged against LIC policies are inclusive of this GST amount. You can use the LIC Premium Calculator to identify the GST amount charged with the premiums against your desired coverage.

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What Is GST?

GST stands for Goods and Services Tax that is levied on consuming a product or service. It was introduced in 2017 as a uniform indirect taxation system to replace all indirect taxes such as service tax, excise duty, etc. Since insurance is a service, the introduction of GST impacted the premiums charged for life insurance policies, leading to an increase in the price of the policies. For instance, the service tax of 15% that was previously levied on the premiums payable for term life insurance policies increased to 18% following GST. 

GST Rates On LIC Policies

GST rates are different for different kinds of policies. The following table illustrates the GST rates on the premiums charged across different LIC policies

S. No.  Type of LIC Policy GST Charged On GST Rate
1 LIC Term Insurance Premiums 18%
2 LIC Health Plans Premiums 18%
3 ULIPs Charges 18%
4 LIC Life Insurance (New Business Premium including Single Premiums) Premiums 4.50% *
5 LIC Pension Plans (New Business Premium including Single Premiums) Premiums 4.50% *
6 LIC Annuity Plans First Year Premium 4.50% *
Single Premium 1.80% **
7 Renewal Premium of LIC’s Life, Pension and Annuity Plans Premiums 2.25% ***

* GST at a rate of 18% is levied on 25% of the premium charged in the first year. 

** GST at a rate of 18% is levied on 10% of the single premium charged for annuity plans.

*** GST at a rate of 18% is levied on 12.5% of the premiums charged in subsequent years.

Sample Illustrations Of GST Amount On LIC Policies

Based on the GST rates mentioned above, let’s assume a sample policyholder who has to pay a premium amount of say Rs. 10,000 annually. The following shall be the GST rates across different LIC policies. 

  • LIC’s Term Insurance Plans - The applicable GST rate is 18% on LIC’s term plans. Therefore, if you are charged an annual premium of 10,000 for a term insurance policy, Rs. 1800 will go towards GST. 

  • LIC’s ULIPs - With ULIPs, GST is not charged on the portion of premiums paid towards investments. Instead, it is levied at 18% on the cost heads and fund management charges.

  • LIC’s Life Endowment Policies - With traditional life insurance policies, the applicable GST rate is 4.5% on the first-year premiums and 2.25% on the subsequent premiums. Subsequently, if you are charged an annual premium of Rs. 10,000 on your LIC’s life insurance scheme, the applicable GST amount shall be Rs. 450 for first-year premiums  and Rs. 225 for subsequent premiums. 

  • LIC’s Single Premium Annuity Plans - Annuity plans require you to pay a lump sum amount to get income benefits post retirement. The GST component is applicable to this lump sum purchase price. Assuming that you get an annuity cover at a purchase price of Rs. 10 Lakhs, the applicable GST shall be Rs. 18,000 at 1.8% GST rate. 

GST Charged On Other Components

Apart from the premiums, GST charges are levied on delayed premium payment, additional premiums for riders, charges recovered from policyholders, etc. 

  • GST at a rate of 18% is levied on the interest payable against delayed premium payments. 

  • GST at a rate of 18% is levied on Cheque Dishonor Charges including postage. 

  • GST shall be levied on alteration fee, duplicate policy preparation, quotation fee, fee charged for policy cancellation or changing nominations, etc. 

GST Exemptions

The GST Council has established GST exemptions under certain insurance schemes and services. There are:

  • Janashree BimaYojana(JBY)

  • Aam Aadmi BimaYojana(AABY)

  • Life micro-insurance products with a maximum cover of Rs. 2 Lakhs (as approved by the Insurance Regulatory and Development Authority) 

  • Varishtha Pension BimaYojana

  • Pradhan Mantri Jeevan Jyoti BimaYojana (PMJJBY)

  • Pradhan Mantri Jan Dhan Yojana

  • Pradhan Mantri Vaya Vanadan Yojana

  • Other insurance schemes of the State Government - notified by the Government of India on the recommendation of GSTC

  • Life insurance by way of the National Pension Scheme (NPS)

FAQ's

  • Do I have to pay GST on term insurance riders?

    If you have opted for riders such as accidental death benefit, you are liable to pay GST at a rate of 18% on the additional premium charged for the same.
  • How to calculate tax on LIC policies?

    The online LIC premium calculator featured on the insurer’s website can be used to find out the exact amount of tax payable along with the premium. 
  • Is GST inclusive of other taxes payable on the premium amount?

    GST is the standard uniform tax levied on life insurance premiums. It replaces all other kinds of taxes that were previously applicable. 
  • How can I view the GST component on my premium payments?

    The details of GST shall be visible on the premium receipts that are offered to you on successful payments.

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