Composite Rate of Tax - Life Insurance Business - Service Tax Practice Manual / Ready Reckoner - Service Tax

Composite Rate of Tax - Services by an Insurer Carrying on Life Insurance Business Rule 6(7A) of Service Tax Rules, 1994 An insurer carrying on life insurance business shall have three option to pay service tax on services provided by him under section 66B and rule 6(7A) OPTION A : Rate of tax as per section 66B, shall be @ 14% on the: [rule 6(7A)(i) of Service Tax Rules, 1994] i. Gross premium charged from a policy holder minus ii. Amount allocated for investment or savings Thus, tax at 14% of (i) - (ii) OPTION B: Composite Rate of tax will as follows: [ rule 6(7A) of Service Tax Rules, 1994] 1 In case of single premium annuity policies, tax @1.4% on single premium charged from the policyholder. Thus, tax @1.4% on the single premium amount. 2 (a) 3.5% of the premium charged from policyholder in the first year, and 2 (b) 1.75% of the premium charged from the policyholder in subsequent years Thus tax @ 3.5% and 1.75% as the case may be on premium charged. Note:- Benefit of composite rate of tax shall not be available in cases where the entire premium paid by the policy holder is only towards risk cover in life insurance. OPTION C.: Value of tax as per section 66B, will be @ 14% on the actual value of taxable services.