0% GST on Life Insurance, Down from 18%

Existing GST on life insurance plans

Before the new reform was introduced, here’s how GST rates applied on different types of life insurance plans –

Changes in GST regime in life insurance

On 3^rd September 2025, the finance minister, Mrs. Nirmala Sitharaman life insurance policies tax exempt. According to the , life insurance premiums have been made GST-exempt with effect from 22^nd September 2025, giving policyholders the much-needed financial relief.

For instance, prior to the new , life insurance premiums attracted 18% GST. That meant the policyholders had to shell out additional 18% for their life insurance policies. However, with the latest changes, the premium would incur no GST. This would for policyholders.

Here’s what has changed –

Let’s understand with an example for term product –

So, with the new changes, you saved ₹1800.

What the change could mean for the insurance industry?

With the exemption on GST, health and life insurance premiums would become cheaper. This might give the insurance industry a boost. As such, the insurance industry can witness –

•  A surge in the demand for insurance products as premiums become more pocket-friendly.
• Increased insurance penetration – As the demand for insurance products increases, it can directly increase the penetration of insurance in India with more and more people having a suitable life insurance policy.
• Reduced chances of lapsation – Life insurance plans are long-term plans. They might require you to pay premiums for a specified tenure to enjoy the full benefits. Unaffordable premiums can make premium payments difficult causing a lapse. However, now as the premiums would reduce, it might ease the financial burden on policyholders allowing them to pay the premium duly and avoid lapses.

How would the change impact you?

As insurance premiums reduce, you can even benefit. Here are some benefits that you can get –

• You can opt for a higher sum assured as premiums become more pocket-friendly. This can help you be optimally insured so that the policy benefits can meet the financial needs for which you bought the policy.
• You can choose different types of insurance plans depending on your financial needs. For instance, if you have term insurance and you also want to save for your child’s future needs, you might be able to buy a child plan as premiums become affordable.
• Reduced premiums would increase your savings too. You can use the increased savings to increase your investments and save more towards your financial goals. 

Wrapping up

GST exemption on insurance is a welcome step for the industry and the policyholders, both existing and prospective. This would make insurance products more cost-effective, drive demand, and also make it possible for individuals to secure optimal coverage for maximum protection. So, assess your coverage needs and buy a suitable life insurance policy today.

FAQs

Does GST exemption apply to all types of life insurance plans?

GST exemption applies to all types of life insurance plans like term insurance , endowment plansULIPs

Is it possible to increase my sum assured during the policy term?

Increasing the sum assured might be allowed under some plans that offer the life stage benefit. Such plans allow you to increase the sum assured at important life stages like marriage or childbirth. At these stages, the sum assured can be increased. However, if the plan does not have this benefit, increasing the sum assured might not be allowed during the policy term. In such cases, you can buy additional life insurance plans to supplement the coverage.

Would any additional proof be needed to claim GST exemption on premiums?

No additional proof would be required to claim GST exemption for individual life insurance plans. The premium would be calculated without the GST and you would have to pay the calculated premium.