Service tax will make LIC policies costly from October

Through October, LIC policies will cost more. Life Insurance Corporation, which is the reason for 83 per cent with the market share, will levy service tax of around 3 % on all non-unit-linked products beginning October 1.

This means if the annual premium on your money-back policy from LIC is Rs 10 lakh, you'll have to pay an additional Rs 30, 000.

While private insurers squeeze in a service tax section the premium paid out by customers, LIC hasn't been levying the levy on its well-liked endowment and money-back strategies.

From October, even so, all LIC procedures will attract another service tax, affirms a senior organization official. LIC obtained Rs 1, 87, 000 crore since premiums towards it's non-unit linked rules in 2011-12.

IRDA DIKTAT

Inside a recent announcement, insurance watchdog IRDA (Insurance Regulatory and Development Authority) remitted that service levy shall not be within the contractual premium, nevertheless collected from policyholder as a stand alone.

 We will start out charging service tax around 3 per dollar upfront to policyholders from October 1, as prescribed through the IRDA.

“We are at this time absorbing the service tax as a part of the policyholder’s cash, as the share capital with the Government (which is usually our owner) is around Rs 100 crore. ”

He further explained that whenever service tax is usually charged separately, LIC might be able to pay higher bonuses for the policies.

All along LIC continues to be paying the service tax through the money in the actual policyholders’ account (which holds the premium obtained and income from investments). It may be the surplus in this account that's declared as bonus on traditional strategies.

Customers may, even so, see this move only just as one additional burden.

A couple of LIC agents which Business Line spoke to said the actual service tax has been a deterrent specifically for immediate annuity strategies and single premium products the place that the premium is normally large.

“LIC may lose the benefit over other regular plans from exclusive insurers now, and though this can come as some sort of shock to consumers initially, they will slowly get accustomed to the new normal”, claimed an LIC real estate agent.