# Exemptions for Insurance and Pension Business

## The structure

Insurance exemptions are heavily scheme-based — most of them list government-backed social-security schemes by name. The two cross-cutting tests to keep in mind are:

1. Who is the insured? (Individual / family vs. group)

2. Who is the provider? (Government scheme vs. private commercial)

## (1) Life insurance under notified schemes — Exempt

Janashree, Aam Aadmi, Varishtha Pension Bima Yojna
Pradhan Mantri Jeevan Jyoti Bima Yojna, Jan Dhan, Vaya Vandan Yojna
Life micro insurance product up to maximum cover of ₹2,00,000

## (2) Life/Health insurance to an individual (not a group) — Exempt

Applies when the insured is an individual OR an individual + his family treated as a family-group under the same contract.
NOT exempt when insurance is taken for a group (e.g., employer-employee group cover) — taxable.

## (3) General insurance under notified schemes — Exempt

Hut, cattle, agricultural pump set, failed-well insurance; Rashtriya Swasthya Bima Yojna; Bangla Shasya Bima Yojna; Janata personal/Group personal/Gramin accident policy; Jan Arogya; Pradhan Mantri Fasal Bima Yojna; Universal health; Niramaya health insurance.

## (4) Reinsurance

Reinsurance of any scheme listed in (1), (2) or (3) — Exempt.

## (5) Pension contribution collection

Collection of contribution under Atal Pension Yojna or any State Government pension scheme — Exempt.

## (6) Life insurance services

Annuity under NPS by PFRDA
By Army / Naval / Air Force Group Insurance Fund to its personnel or coast guards
By Central Armed Police Force to its personnel

## (7) Services by statutory bodies

ESIC, EPFO, Coal Mines PF Organisation — to persons governed by the respective Acts. NPS Trust against administrative fees — also exempt.

## (8) BF/BC services

Services by Business Facilitator/Business Correspondent to a rural branch of an insurance company — Exempt.

## (9) Motor Vehicle Accident Fund

Insurance service provided by the Motor Vehicle Accident Fund out of contributions made by insurers from premium collected for third-party motor insurance — Exempt.

## Quick recall

Government / social-security scheme → most likely exempt.
Individual or family-as-group cover → exempt.
Group cover (employer or otherwise) → taxable.
Reinsurance follows the underlying scheme.

Worked example

### Example 1

Q. ABC Ltd. takes a group health insurance policy for all its 200 employees from XYZ Insurance Co. Is this exempt?

A. Taxable. Health insurance to an individual or individual + family is exempt, but a group policy taken by an employer is specifically not covered by the exemption.

### Example 2

Q. XYZ Insurance Co. provides reinsurance to LIC for policies issued under Pradhan Mantri Jeevan Jyoti Bima Yojna. Taxable?

A. Exempt. Reinsurance of any scheme exempted under entries (1), (2) or (3) is itself exempt, and PMJJBY is a notified life-insurance scheme.

⚠️ Common exam mistakes

Treating employer-provided group health insurance as exempt — group insurance (employer or otherwise) is taxable.
Forgetting the ₹2,00,000 maximum-cover cap on life micro-insurance — covers above this are taxable.
Assuming all motor insurance is exempt — only the Motor Vehicle Accident Fund's service from third-party premium contributions is exempt; ordinary motor insurance is taxable.
Missing that reinsurance is exempt only where the underlying primary insurance is in the exempt list.

Reference: — Notification No. 12/2017-CT(R)

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Insurance and Pension Business Exemptions

Worked example

⚠️ Common exam mistakes