Service tax paid on insurance

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Querist : Anonymous

Querist : Anonymous (Querist)

26 September 2012 can i claim service tax paid for proprietor's life insurance policy premium

CA Suresh Jain

CA Suresh Jain (Expert)
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26 September 2012 Yes, if it has been billed in the name of firm/service tax assessee.

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Querist : Anonymous

Querist : Anonymous (Querist)

27 September 2012 we have not received invoice as such, its policy schedule in which service tax amt. & service tax regestration no. is mentioned

Querist : Anonymous

Querist : Anonymous (Querist)

28 September 2012 please reply?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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24 July 2025 In your case — regarding **claiming service tax paid on a proprietor's life insurance premium** — here’s the position:

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### 🔴 **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.

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### 📌 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**.

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### ✅ 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.

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### ⚠️ 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.

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