GST Removed on Health and Life Insurance Premiums: How Policyholders Will Benefit from Zero Tax

New Delhi, Sept 4, 2025 – In a landmark decision aimed at easing financial pressure on households, the GST Council has announced that all health and life insurance premiums will now be tax-free. The announcement came after the 56th meeting of the Council, chaired by Finance Minister Nirmala Sitharaman, who confirmed that the revised rates will take effect from September 22, the first day of Navratri

.

This reform is being hailed as a historic step that could make insurance more affordable and accessible for millions of Indians. Industry leaders believe the move will boost penetration of both health and life insurance in the country, providing stronger financial safety nets for families.

A Major Relief for Policyholders

Until now, insurance policyholders had to bear an additional 18% GST

on their premiums. For example, if someone purchased an insurance policy with a base premium of ₹100, the actual amount payable was ₹118 after tax. With GST reduced to zero, customers will now only pay the base premium, significantly lowering the cost of insurance coverage.

Take another case: for a ₹20,000 annual premium, policyholders were previously paying an extra ₹3,600 in GST

, bringing the total to ₹23,600. With the new exemption, customers will save that entire amount, making insurance nearly 15% cheaper overall.

Which Policies Are Covered?

The GST waiver applies across a wide spectrum of insurance products:

• Life Insurance

  • Term Life Plans

  • Endowment Policies

  • Unit Linked Insurance Plans (ULIPs)

  • Reinsurance contracts

• Health Insurance

  • Individual Health Policies

Family Floater Plans

Senior Citizen Policies

Reinsurance contracts

This means everything from a young professional’s ULIP plan to a retiree’s health cover will now be GST-free, reducing financial burden across age groups.

Industry Reactions

The insurance industry has welcomed the decision wholeheartedly. Dr. Tapan Singhel, MD and CEO of Bajaj Allianz General Insurance

, called it “a historic reform that will make healthcare protection far more affordable and accessible.”

According to experts, India has long struggled with low insurance penetration compared to global standards. By removing GST, the government is signaling that it wants to prioritize financial protection as an essential service rather than a luxury product.

Why This Matters for the Common Man

For the average family, insurance is no longer an optional expense but a necessity. Rising medical costs, lifestyle-related health issues, and increasing financial liabilities have made health and life insurance critical for financial planning.

By eliminating GST, the government is not only cutting costs but also sending a message that insurance should be a basic pillar of financial security

for every Indian. Analysts estimate that this move could result in a double-digit growth in new policy purchases, especially among middle-class households.

Broader Impact on the Economy

• Consumers: Lower premiums will encourage more people to buy health and life insurance.

• Insurers: Companies expect higher demand, especially in tier-2 and tier-3 cities where affordability has been a major barrier.

• Government: While it may lose some GST revenue in the short term, higher insurance penetration will reduce the burden of public healthcare spending in the long run.

Bottom Line

Starting September 22, 2025, policyholders across India will pay zero GST on both health and life insurance premiums. For families, this translates into meaningful savings and increased access to financial protection. For the insurance industry, it could mark the beginning of a new era of growth and inclusivity.

This Diwali season, the government has effectively given households a powerful financial gift — affordable insurance without the extra tax burden.