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Starting September 22, 2025, a major change in India’s taxation on insurance will take effect — the GST (Goods and Services Tax) on life and health insurance premiums will be reduced to 0% from the current 18%. While this move is a welcome relief for policyholders, it has sparked a key question:
Should you delay paying your premium to take advantage of this tax cut?
At first glance, the idea of postponing premium payments to save 18% might seem like a smart financial strategy. However, as the Insurance Regulatory and Development Authority of India (IRDAI) and tax experts point out, this could be a risky and counterproductive move.
Let’s break it down.
What’s Changing?
As per the 56th GST Council meeting, from September 22, 2025, the following will apply:
- GST on individual life insurance, health insurance, and personal accident policies = 0%
- This includes term plans, endowment plans, ULIPs, mediclaim policies, and more.
- The move aims to make insurance more affordable and accessible for individuals, especially middle-income families and first-time policyholders.
Why People Are Considering Delaying Premium Payments
Imagine you have a term insurance premium of ₹30,000 due on September 15, 2025. Today, that includes an 18% GST charge (₹ 5,400), so your total payment is ₹ 35,400. If you pay after September 22, you expect to pay only ₹ 30,000 — saving ₹5400 instantly.
But here’s the problem: insurance doesn’t work that way.
Why This Strategy May Not Work
1. Tax Rate Is Based on Due Date, Not Payment Date
IRDAI has clarified that GST is applicable based on the date of supply, which in insurance is the due date or policy renewal date, not the date of payment.
So, if your policy is due before September 22, the 18% GST still applies — even if you pay during the grace period after the new GST rule kicks in.
2. Delaying Payment May Void Your Coverage
Most policies offer a 15–30 day grace period after the due date to make the payment without a lapse. However:
- During this grace period, you’re not always fully covered.
- Some policies may suspend certain benefits (like hospitalisation claims) until the premium is paid.
- If something happens during this period, your claim could be rejected.
3. No Refund on Already Paid GST
If you’ve already paid your premium (with GST) before Sept 22, you’re not eligible for a refund. The tax system does not allow retroactive benefits.
So waiting to pay might not help — and could even hurt you by risking lapse in coverage or denied claims.
4. You could Incur Penalties or Lose Rerenewal Benefits
Late payments can:
- Impact your No-Claim Bonus (NCB) on health insurance
- Trigger late payment penalties in some policies.
- Affect future renewal discounts or benefits
🧮 Example Scenario
| Situation | GST Applied | Coverage Active? | Safe? |
| Premium due Sept 10, paid Sept 15 | 18% | ✅ Yes | ✅ Yes |
| Premium due Sept 15, paid Sept 25 | 18% | ⚠️ Risky (grace period) | ❌ No |
| Premium due Sept 25, paid Sept 26 | 0% | ✅ Yes | ✅ Yes |
What About New Policies?
If youre planning to buy a new policy, waiting until after September 22 does make sense — you’ll get the full benefit of zero GST.
But only if:
- You’re not currently exposed without insurance.
- There’s no urgency in getting coverage.
- You’re not letting an old policy lapse in the meantime.
Will Premiums Drop by 18%?
Not exactly.
Even though the GST is being cut to zero, insurers will now lose Input Tax Credit (ITC) benefits, which helped offset their internal costs. Without ITC, insurers may pass some of their increased operational costs to customers by:
- Adjusting premium structures, or
- Reducing discounits or bonuses
So, while the net impact is still positive for policyholders, you may not see a full 18% reduction in premiums.
✅ Final Advice
| Thinking of Delaying Premium Payment? | Recommendation |
| Renewal due before Sept 22 | ❌ Don’t delay — GST will still apply |
| New policy or renewal due after Sept 22 | ✅ Go ahead — enjoy zero GST benefit |
| Within the grace period, but expecting savings | ❌ Risky — you’ll still pay GST and may lose coverage |
Conclusion
While the upcoming GST exemption on ininsurance is great news, trying to delay premium payments just to save on tax may be short-sighted and risky. You could:
• Still end up paying the same amount,
• Temporarily lose coverage,
• Or worse — have a valid claim denied.
It’s best to pay premiums on time, maintain continuous protection, and plan to enjoy the GST benefit at your next renewal.