In a landmark reform, the Government of India has reduced GST (Goods and Services Tax) to zero on term insurance and health insurance policies, effective from 22 September 2025.
Earlier, these policies carried an 18% GST, which significantly increased the cost of premiums for individuals and families.This move, approved in the 56th GST Council Meeting, aims to make essential insurance products more affordable, encourage wider adoption, and strengthen India’s financial protection framework.
By removing the GST burden, the government seeks to boost insurance penetration, reduce the financial stress of healthcare costs, and support citizens in building a secure future.
Key Features of the Reform
| Feature | Details |
| GST Rate | Reduced from 18% to 0% on term and health insurance |
| Effective Date | 22 September 2025 |
| Applicable Policies | Individual term life insurance, individual health insurance (including family floater, critical illness, Older citizen plans) |
| Excluded Policies | Group or corporate insurance plans will still attract 18% GST |
| Reinsurance Benefit | Reinsurance of individual policies also exempted |
| Objective | Promote financial inclusion, affordability, and social security |
| Part of | Broader GST 2.0 reform for simplifying India’s tax structure |
Major Benefits
1. Lower Premiums for Policyholders:
- Individuals will no longer have to pay an extra 18% GST.
- For example, a ₹10,000 premium will now remain ₹10,000 instead of ₹11,800 — a direct saving of ₹1,800 per year.
2. Increased Insurance Adoption: By reducing costs, this reform encourages more people to buy term and health insurance — especially the middle and lower-income groups who found premiums expensive earlier.
3. Boost to Financial Security: More affordable insurance ensures that families can safeguard themselves against medical emergencies, hospital expenses, or the sudden loss of a breadwinner.
4. Encourages Preventive Healthcare: Greater access to health insurance promotes timely medical treatment and preventive healthcare — reducing long-term public health burdens.
5. Economic & Social Inclusion: The reform aligns with the government’s vision of universal social protection, ensuring every citizen can afford essential risk coverage.
How It Impacts You
| Scenario | Before Reform | After Reform |
| Term Insurance (₹12,000 base) | ₹12,000 + ₹2,160 GST = ₹14,160 | ₹12,000 total |
| Health Insurance (₹30,000 base) | ₹30,000 + ₹5,400 GST = ₹35,400 | ₹30,000 total |
| Existing Multi-year Policies | GST already paid not refundable | New renewals will be GST-free |
| Group Insurance | Still taxable (18%) | No change |
Important Notes
- Insurers lose input tax credit (ITC) benefits after this change, which may slightly affect their cost structure.
- Consumers should check renewal invoices carefully after September 2025 to ensure the GST exemption is applied.
- Group insurance or employer-provided policies will continue to attract GST.
- This reform is expected to significantly improve India’s insurance penetration, currently below the global average.
Conclusion
The 0% GST on term and health insurance is a transformative reform that brings direct savings for millions of Indians and encourages financial protection for every household.
By making life and health insurance more accessible, this initiative not only strengthens social security but also aligns with India’s broader vision of “Insurance for All by 2047.”
FAQs
1. When will the 0% GST on insurance come into effect?
Ans: It will apply from 22 September 2025 onwards. Any premium paid after this date for eligible individual term or health insurance will be exempt from GST.
2. Which insurance policies are covered under this exemption?
Ans: All individual term life insurance and individual health insurance (including family floater and older citizen plans) are covered.
Group insurance and corporate policies remain taxable.
3. Will I get a refund if I paid a multi-year premium earlier with GST?
Ans: No. GST already paid before the reform date cannot be refunded. The benefit applies only to payments made on or after 22 September 2025.
4. Will insurers increase base premiums later?
Ans: Possibly. Since insurers lose input tax credits, some may adjust pricing slightly. However, overall premiums are still expected to be lower than before.
5. What does this mean for existing policyholders?
Ans: If your policy renews after the effective date, you will automatically benefit from the 0% GST rule. No special application is needed.
My self Anita Sahani. I have completed my B.Com from Purbanchal College Silapathar. I am working in Dev Library as a Content Manager. A website that provides all SCERT, NCERT 3 to 12, and BA, B.com, B.Sc, and Computer Science with Post Graduate Notes & Suggestions, Novel, eBooks, Health, Finance, Biography, Quotes, Study Materials, and more.
