Stamp duty on the Policy

Every life insurance policy is to be stamped with ‘Insurance stamps’ @20 paise per Rupees 1, 000 sum assured. That means on a policy with a sum assured of Rupees 1, 00, 000 insurance stamps worth Rupees 20 is to be affixed on the policy bond. Till a few years back the rate was 40 paise per Rupees 1, 000 sum assured. Stamp duty is dependent on sum assured of a policy. In group insurance policy total sum assured on all lives covered under the policy is calculated and stamp duty is paid by way of affixing insurance stamps on the policy bond. Some of the States (of India) have permitted lump sum deposit of stamp duty to the State Treasury by the life insurance Company and consequently a remark “Consolidated stamp duty paid to the government vide money receipt number….dated…” is affixed on the policy bond. When a policy is absolutely assigned to another person a transfer of property takes place requiring payment of stamp duty to the government. In such cases the assignor (and not the insurer) has to pay stamp duty. However a concession has been given that if assignment of the policy is done by writing it on the policy bond itself the assignment is exempted from stamp duty. However if assignment is done through a separate deed (and not on the policy bond) it has to be stamped as per provisions of the Stamp Act.

Key words:

Life insurance

Policy bond

Stamp duty

Exemption from stamp duty