In a significant relief to policyholders, the Goods and Services Tax (GST) on individual health and life insurance premiums has been reduced to zero. The decision was made during the 56th GST Council meeting on Wednesday and will go into effect on September 22, 2025.
This means that the current 18% GST on your insurance premium will no longer apply. The change is expected to directly reduce consumer costs, making insurance more affordable for individuals and families.
Key Highlights
- GST on individual health and life insurance premiums has been fully exempted, down from 18%.
- The move is part of India’s broader GST overhaul—simplified two-slab (5% & 18%) tax structure.
State consensus and family relief
Nirmala Sitharaman, the Union Finance Minister, stated that the Council made the decision unanimously.
"This was heavily questioned last year. Opposition members in parliament questioned, 'You want to tax insurance premiums?' We came up with this after conducting a thorough study and consulting with stakeholders, so that families and individuals who purchase individual insurance can benefit," Sitharaman stated.
She added, "Of course, we will ensure that companies pass on this benefit to customers who purchase insurance. We want to provide relief to people looking for medical insurance.
Also Read: Revised GST Rates Effective September 22: Key Details
What does GST mean for policyholders
Currently, if the base premium is ₹200, the final amount paid after adding 18% GST comes to ₹236. The tax alone increases the cost of the policy by ₹36. With GST now eliminated, the total payable will only be the base premium, making insurance more affordable for individuals and families.
According to HSBC's analysis, the GST waiver could reduce health insurance premiums by approximately 15%. However, according to the same report, the government may lose approximately USD 1.2-1.4 billion in revenue each year.
