From 1st July, your annual premium outgo is going to increase by 1000INR. Yes! The new taxation law will make a whole in your pocket when it comes to premium payment. The government of India has revised the taxes charged on Insurance Premium and have made it expensive.
Earlier, an insurer was bound to pay 15% of the total amount in form of varied taxes but with GST replacing all the obsolete and grumpy old taxes, the insurer is now bound to pay 18% tax. In simple language, for every 100INR paid as premium, you will have to 18INR as taxes.
Note: Taxes on Health, Car, Term and Endowment plans are subject to vary.
Risk averse products: Investment products like ULIP, which involves market risk, were previously charged under the tax slab of 14.5% but now they will be charged under the tax slab of 18%.
Saving tools: Insurance products like Endowment incurred a lesser amount of taxes in form of 3.5% for the first year and then 1.7% for the consecutive years. Endowment plans are going to incur an increased amount of taxes. The government will look into the intricacies and soon release the enhanced tax slabs for these categories.
Non-life companies are going to face a loss in coming times because of the increased tax rates; a lot of people will look into their pockets, revise their financial plan and see whether they can make a purchase or not. The improved tax slab may not look a lot but 18INR per 100 INR is surely something that will make middle-class buyers think.
Car insurance and health insurance are generally expensive and the added taxes will only make it difficult for common men to have the best of health and car. The government might consider bringing in some changes but for now, it is no mood to take a step back.
Goods and services taxes has created an environment of upheaval in the country, a lot of people are not aware of the changed system and tax slabs. People are failing to understand how it is going to improve and benefit them and the country in the long run.
A lot of people are also protesting for the taxes that have been levied on textile products, which were earlier exempted from taxation. The government must look into their plans and try to compensate the consumer and manufacturers equally.