Service tax paid on insurance
Querist : Anonymous
Querist : Anonymous
Querist : Anonymous
---
### 🔴 **No CENVAT Credit on Life Insurance Premium for Proprietor**
As per **CENVAT Credit Rules, 2004**, credit of service tax paid on **life insurance services** is **allowed only when it is used for providing output taxable services** or **used in the course of business**.
However, **proprietor’s personal life insurance** is treated as a **personal expense**, **not a business expense**, and thus:
> ✅ **You CANNOT claim CENVAT credit** of service tax paid on it — even if:
>
> * The policy mentions service tax amount and registration number.
> * It's paid from the firm's account.
---
### 📌 Relevant Reference:
Rule 2(l) of the **CENVAT Credit Rules** excludes **services used primarily for personal use or consumption of any employee**. Life insurance for the **proprietor** falls under this exclusion.
Even if the **firm’s name is used**, unless the policy is for employees as part of a group insurance plan (like Mediclaim under employee benefits), **credit is not allowed**.
---
### ✅ When Credit **is Allowed**:
* Group insurance taken for employees as part of employment benefits.
* Insurance used for risk coverage of assets used in providing taxable services.
---
### ⚠️ Conclusion:
* Life insurance of a **proprietor** is considered a **personal service**, not eligible for service tax credit.
* The **policy schedule alone is not sufficient** for credit unless it clearly shows:
* Billed in name of the **firm**,
* Used **exclusively** for providing output service (not applicable for personal life insurance).
---
Let me know if you need a **sample reply to the department** or a **clarification letter** for audit.
Click here to login now
Similar Resolved Queries
- CAPITAL GAIN REDEVELOPED FLAT
- CLOSING STOCK QUERY
- REGARDING ITR FILING QUESTION
- Requirement under FEMA &RBI
- Multiple payment of self assessment tax for A Y 2025-2026
- Gst reverse charge mechanism to be claimed in the month of payment
- Taxation on Old jewellery sold
- PF wage ceiling
- Itr processing refund
- Error in uploading Form 10BD
- Concept of Vendor and customner reconciliation
- Mistake in e-invoice identified after 24 hours
- EXPORT PAYMENT
- NRI ITR2 account in 2025-26.
- Query regarding reporting of exempt foreign remuneration in ITR (AY 2026-27)
- FEMA/RBI treatment — Amazon.ca arbitrage (US buy, Canada sell, goods never enter India)
- Goods return by customer
- INWARD REMITTANCE FOREIGN
- CPC and SAC
- Account freezed for Ineligible ITC Scrutiny for GST Annual Return
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
CAclubindia
