To deduct service tax or not from insurance premium?

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A Roy

Staff

65 Points Posted on 04 March 2013

1. Earlier I had read arguments both in favour of and against of deducting service tax and education cess from life insurance and mediclaim premiums for tax calculation purpose. I would like to know what is the currently accepted view. 2. Suppose someone pays amount(A) as instalment of a term insurance premium, to which is added service tax+ education cess(B) so that total amount paid is C=A+B. The statement mentions that out of this, amount(D) is paid towards critical illness cover (deductible u/s 80D). Unfortunately they do not mention what amount had been paid as service tax and education cess corresponding to critical illness cover premium. What amount of tax deduction should he consider u/s 80C and 80D?

Replies (3)

Guest

Posted on 04 March 2013

according to me the amount of deduction u/s 80c will be only premium amount, no service tax.

CA.D.RAGAVAN

CHARTERED ACCOUNTANTS

205 Points Posted on 04 March 2013

Cost of Insurance includes the Service Tax and hence the Total Payment including Service Tax is eligible ofr Sec. 80C & Sec 80D. We cant not make payment without Statutory Dues. It forms part of the Cost.

A Roy

Staff

65 Points Posted on 04 March 2013

Thanks for your attention but again there are conflicting views. I guess the law does not make it specific what to do in such cases. Are there other kind of taxes where such problems arise? Can some expert here shed more light with examples?

Now a days I notice the mediclaim statement for income tax deduction purpose states the amount inclsive of service tax (in my case), although they show the breakup of actual premium amount and the service tax elsewhere.