GST on Health and Life Insurance in India (Sept 2025 Update)
From 22 September 2025, the Government of India has removed GST (Goods and Services Tax) on individual health and life insurance premiums, bringing the rate down from 18% to 0% GST. This means that policyholders no longer have to pay the additional tax on their premiums, making both health insurance and life insurance policies more affordable.
Earlier, if your annual health insurance premium was ₹20,000, you were paying around ₹3,600 extra as GST, taking the total to ₹23,600. With the new rule, you now only pay the base premium amount of ₹20,000, without any added tax.
This change has been introduced to reduce the financial burden on individuals and encourage more people to secure health and life insurance policies. It applies to individual policies such as health insurance, term insurance, ULIPs, and endowment plans. However, group insurance policies offered by employers are not covered under this exemption.
While this update provides immediate relief to policyholders, it also raises new questions: Why did the government introduce this change now? How does it impact insurers? Will the premiums remain lower in the long run? Let’s explore these aspects in detail.
What is GST on Health and Life Insurance?
The Goods and Services Tax (GST) is a value-added tax applied on most goods and services in India, including insurance. When you purchased or renewed a health or life insurance policy before September 2025, an 18% GST was added to the base premium.
For example:
If your health insurance policy had a premium of ₹15,000, you paid an additional ₹2,700 as GST, making the total ₹17,700.
Similarly, if your life insurance premium was ₹25,000, you ended up paying ₹29,500 after adding GST.
This meant insurance was treated like any other taxable service, even though it is a financial safety net for individuals and families.
GST on Health Insurance Policies
Health insurance was one of the most affected products because premiums already rise with age, pre-existing conditions, and add-on covers. Adding 18% GST on health insurance policies made them significantly costlier, discouraging some families and senior citizens from buying sufficient coverage.
GST on Life Insurance Policies
Life insurance policies, including term plans, ULIPs, and endowment policies, also carried GST on their premiums. This additional cost reduced the affordability of protection and investment-linked products. For instance, in term insurance (already one of the cheapest life covers), GST increased the effective outflow for policyholders by almost one-fifth.
Why Was GST Applied on Insurance?
The government originally levied GST on insurance to bring it under the uniform tax framework, just like banking and financial services. However, critics argued that taxing essential protection products like health and life insurance worked against the larger goal of improving financial security and healthcare access for citizens.
With rising healthcare expenses and the need for financial protection, the earlier GST burden was seen as a barrier. This is what ultimately led to the 2025 reform, where GST on individual health and life insurance premiums was reduced to 0%, making these essential products more affordable for the common man.
Recent Change – 0% GST on Insurance Premiums
In a major relief to policyholders, the Government of India announced that GST on health and life insurance premiums has been reduced to 0%, effective 22 September 2025. This reform means that individuals buying or renewing insurance policies will no longer have to pay the 18% GST that was previously added to their premium.
GST on Health Insurance News (2025 Update)
According to the latest GST on health insurance news, this change applies to all individual health insurance policies—whether basic, family floater, or senior citizen plans. For millions of households, this translates to immediate cost savings, since premiums will now reflect only the base cost without tax.
For instance, if a family was paying ₹30,000 annually for a health policy, they previously paid around ₹5,400 extra as GST. Under the new rule, the total cost is simply the base ₹30,000, making health coverage more affordable.
GST on Life Insurance Policies
The reform also extends to life insurance premiums, including term insurance, ULIPs (Unit Linked Insurance Plans), and endowment policies. Removing GST on life insurance policies makes long-term protection and investment-linked products more accessible to individuals who were previously deterred by the extra cost burden.
Scope and Applicability
✅ Covered: Individual health insurance and individual life insurance policies.
❌ Not Covered: Group insurance policies (such as employer-provided health covers) remain outside the 0% GST exemption and may still involve taxation.
📅 Effective Date: Premiums paid on or after 22 September 2025 qualify for zero GST. Payments already made before this date are not eligible for refunds.
Why This Matters
The government’s move to bring 0% GST on health and life insurance in India is aimed at improving insurance penetration, reducing the financial burden on families, and encouraging more citizens to secure adequate coverage. In a country where healthcare costs are rising rapidly, and financial protection is crucial, this reform is seen as a step towards making insurance more inclusive and affordable.
How Does Zero GST Impact Policyholders?
The reduction of GST on health and life insurance in India to 0% directly translates into lower premium costs for policyholders. Since insurance is a recurring financial commitment, the savings can be significant over the years.
Direct Savings on Premiums
Earlier, an 18% GST on insurance premiums inflated the cost of both health and life policies. With the new rule:
A health insurance premium of ₹20,000 now costs ₹20,000 only (instead of ₹23,600).
A term life insurance premium of ₹15,000 now costs ₹15,000 (instead of ₹17,700).
For families with higher premiums (say ₹40,000–₹50,000 annually), the savings are even larger, reaching up to ₹9,000 a year. Over a 10-year period, this could mean nearly a lakh rupees saved, just from the removal of GST.
New vs Renewal Policies
New Policies: Individuals purchasing fresh health or life insurance policies after 22 September 2025 will directly benefit from 0% GST.
Renewals: Policyholders renewing their plans after the effective date will also pay no GST. However, if you paid your premium in advance before the date, you will not get a refund on the GST portion already paid.
Impact on Health Insurance Policies
For health insurance buyers, especially those with family floater plans or senior citizen coverage, the benefit is substantial. GST on health insurance policies was one of the key reasons many found premiums unaffordable. By removing this tax, the government has made health insurance more accessible for middle-class families and retirees, who are most vulnerable to rising healthcare costs.
Impact on Life Insurance Policies
The waiver of GST on life insurance policies encourages more people to opt for term plans and investment-linked policies like ULIPs. Term insurance, in particular, becomes even more attractive because of its affordability. For young professionals starting their financial planning journey, this makes long-term coverage more feasible.
Senior Citizens & Families
Senior citizens, who already face higher premiums due to age, will benefit the most. For example, a 65-year-old paying a premium of ₹45,000 for a health plan previously paid an additional ₹8,100 in GST. Now, they only pay ₹45,000, reducing the cost burden considerably.
Families with multiple policies (for parents, children, or joint life cover) will also see cumulative savings every year, making it easier to maintain comprehensive protection without stretching the budget.
Implications for Insurers and Premiums
While the removal of GST on health and life insurance in India is a major benefit for policyholders, it has important implications for insurers. Previously, insurance companies could claim Input Tax Credit (ITC) on GST paid for expenses such as agent commissions, marketing, office rentals, and technology services. With the GST exemption, insurers can no longer claim these credits, which makes these costs non-recoverable. As a result, some insurers may consider adjusting the base premium slightly to compensate for this added expense. Industry analysts estimate any increase could be around 3–5%, but even with such adjustments, the net cost for policyholders remains lower than before the 2025 GST reform.
Regulatory authorities, including IRDAI, have instructed insurers to pass on the benefits of GST removal directly to consumers. This ensures that policyholders experience immediate savings when paying for individual health and life insurance policies, while insurers maintain financial stability. Overall, although insurers face higher operational costs without ITC, the long-term impact on policyholders is still positive, making health and life insurance more affordable and accessible across India.
Conclusion – Understanding GST on Health and Life Insurance
The reduction of GST on health and life insurance in India to 0% from 22 September 2025 is a significant step toward making insurance more affordable and accessible. Policyholders now benefit from immediate savings on both new and renewal policies, whether it’s individual health insurance, term insurance, ULIPs, or endowment plans. Families, senior citizens, and young professionals looking for financial protection can take advantage of this reform to reduce their annual insurance costs without compromising on coverage.
While insurers face the challenge of losing Input Tax Credit (ITC) on operational expenses, regulatory safeguards require them to pass the benefit directly to policyholders. Even if base premiums are adjusted slightly over time, the overall savings for consumers remain substantial, making this one of the most consumer-friendly reforms in recent years.
At Money Matter, we help individuals and families navigate these changes by providing expert guidance on choosing the right health and life insurance policies and understanding how GST impacts premiums. Our team can assist you in evaluating policies, comparing benefits, and ensuring you maximize your savings under the new GST rules.
FAQs
Q1: Does 0% GST apply to term insurance?
Yes, the 0% GST applies to all individual life insurance policies, including term insurance, ULIPs, and endowment plans.
Q2: Is group insurance exempt from GST?
No, group insurance policies, such as employer-provided health covers, are not included in the GST exemption.
Q3: Will I get a refund if I paid GST before September 22, 2025?
No, premiums already paid with GST before the effective date are not refundable.
Q4: How much can I save with the GST removal?
Savings depend on your policy premium. For a typical health insurance policy of ₹20,000, the GST removal saves around ₹3,600 annually. Families and senior citizens with higher premiums can save significantly more.
Q5: How can Money Matter help?
We provide guidance on selecting the right health and life insurance policies, understanding GST impacts, comparing premiums, and making informed decisions to maximize savings under the 2025 GST reforms.