The gst rate on insurance premium in India has changed dramatically. From 22 September 2025, the government removed the 18% GST on individual health, life, and personal accident policies, bringing the rate down to 0%.
For policyholders, this means instant savings; a ₹25,000 health insurance plan that once cost ₹29,500 (with GST) now costs only ₹25,000.
I still remember a colleague who delayed renewing his parents’ health plan last year because the premium had shot up after tax.
This year, the same renewal will save him ₹4,500, enough to cover a month’s electricity bill. Similarly, for senior citizens with policies worth ₹50,000 annually, families save nearly ₹9,000, which can fund an emergency fund or medicines.
This change isn’t just about tax policy. It’s about protecting money and making insurance more affordable for ordinary families, students, and retirees alike.
Table of Contents
This isn’t just a policy tweak; it’s money back in your pocket. In this article, we’ll explain:
- What the new gst rate on insurance premium actually is,
- Which policies are exempt?
- How much you save with real examples,
- The long-term impact on households,
- And what policyholders should keep in mind going forward.
What is the GST Rate on Insurance Premium in 2025?
The GST rate on insurance premium was earlier fixed at 18% for most life and health policies. This significantly inflated annual costs.
After 22 September 2025:
- Individual health insurance → GST removed (0%).
- Individual life insurance → GST removed (0%).
- Personal accident insurance → GST removed (0%).
- Group/corporate insurance → Still taxable.
Source: NDTV – GST 2.0 exemption
Which Insurance Premiums Are Covered?
Covered (GST-free from Sept 22, 2025):
- Life insurance premiums (individual).
- Health insurance premiums (individual & family floater).
- Personal accident premiums.
Not Covered:
- Group/corporate insurance policies.
- Commercial/general policies.
- Some add-on riders.
Source: A2ZTaxCorp – CBIC Notification
How Much Money Can You Save?
Here’s how the gst rate on insurance premium change affects real costs:
| Insurance Premium (Before GST) | Old GST @18% | Total Paid Earlier | New Cost (Post-Exemption) | You Save (₹) |
|---|---|---|---|---|
| ₹10,000 | ₹1,800 | ₹11,800 | ₹10,000 | ₹1,800 |
| ₹15,000 | ₹2,700 | ₹17,700 | ₹15,000 | ₹2,700 |
| ₹25,000 | ₹4,500 | ₹29,500 | ₹25,000 | ₹4,500 |
| ₹50,000 | ₹9,000 | ₹59,000 | ₹50,000 | ₹9,000 |
Source: Financial Express – Insurance GST exemption savings
Why This Matters for Policyholders
- Immediate savings: Families save thousands yearly.
- Affordable renewals: No GST shock during payment.
- Encourages new buyers: More households may now purchase coverage.
- Bigger savings for seniors: Senior citizen premiums are high → GST removal = major relief.
- Better value: Instead of paying tax, you can upgrade coverage.
Take Ritu, a 32-year-old working professional in Mumbai. Last year, she paid ₹17,700 for her ₹15,000 health insurance policy because of GST. This year, after the reform, her renewal cost is exactly ₹15,000, saving her ₹2,700. With that money, she chose to increase her coverage by adding a critical illness rider. For her, the GST change wasn’t just about saving money; it was about finally being able to afford better protection.
Impact on Insurers
While customers benefit, insurers face challenges.
- They lose Input Tax Credit (ITC) on costs like commissions and technology.
- Margins may shrink.
- Some insurers may adjust base premiums in the future to offset this.
Source: Business Standard – GST impact on insurers
When Do You See the Benefit?
- Any premium paid on or after Sept 22, 2025 reflects GST-free pricing.
- Payments made earlier still include GST (no refund).
- Check your premium invoice carefully — the GST line should now be zero.
Source: Niva Bupa – effective date of GST exemption
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FAQs
Q1. What is the gst rate on insurance premium in 2025?
From September 22, 2025, the gst rate on insurance premium for individual health, life, and personal accident policies is 0%.
Q2. How much money can I save?
On a ₹25,000 premium, you now save ₹4,500 per year since the 18% GST no longer applies.
Q3. Are group insurance policies GST free?
No, GST exemption applies only to individual/family policies, not corporate or group insurance.
Q4. Does this apply to vehicle insurance?
No, vehicle insurance is not exempt and still carries GST.
Q5. Will insurers increase base premiums later?
Possibly. Since they lose tax credits, insurers may revise base prices in the future.
The decision to change the gst rate on insurance premium from 18% to 0% is a game-changer for millions of Indians.
For the first time in years, health and life insurance premiums are free of tax, making protection more affordable and rewarding.
This isn’t just about percentages — it’s about real household savings. Families paying ₹25,000 now save ₹4,500 instantly.
Senior citizens with higher premiums see even greater relief. Students and young professionals entering the insurance market will find policies easier to afford.
Yes, insurers may adjust pricing in the long run, but the immediate impact for policyholders is clear: more money stays in your pocket.
If you’ve delayed buying insurance because of high costs, now is the best time. With the gst rate on insurance premium reduced to zero, you protect your family and save money at the same time.
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