{"id":2201,"date":"2026-11-12T13:52:53","date_gmt":"2026-11-12T13:52:53","guid":{"rendered":"https:\/\/policyghar.com\/blog\/?p=2201"},"modified":"2026-11-12T13:52:53","modified_gmt":"2026-11-12T13:52:53","slug":"zero-gst-on-health-and-term-insurance-how-much-are-indian-policyholders-actually-saving","status":"publish","type":"post","link":"https:\/\/policyghar.com\/blog\/zero-gst-on-health-and-term-insurance-how-much-are-indian-policyholders-actually-saving\/","title":{"rendered":"Zero GST on Health and Term Insurance: How Much Are Indian Policyholders Actually Saving?"},"content":{"rendered":"\n

Insurance premiums represent one of those costs that we all understand are necessary, but that we all suffer when our renewal arrives. So, with the government abolishing GST on individual health and life insurance premiums from 22 September 2025, a natural question arises: how much lighter will our bill actually become? The new provision entails an exemption from paying the earlier 18% GST on premiums for eligible policyholders, thus providing effective relief to those who protect both their health and the financial stability of their family. However, the savings should not be simply called the 18% discount. The type of insurance contract (individual or group), the timing of premium payments, as well as any amendments made to the insurer’s base price, play an essential part in the true savings amount. In the article below, I will analyse the effects of GST on health insurance<\/a> and GST on term insurance with the help of clear examples showing how much Indian policyholders can save.<\/p>\n\n\n\n

1. How Has the GST on Life and Health Insurance Changed?<\/strong><\/p>\n\n\n\n

a. Personally owned health and life insurance: The GST rate was 18% on all premiums for individually owned health\/life insurance policies until September 2025. This did not necessarily mean the quoted insurer premium was the bill an individual customer paid. An 18% GST was added to the relevant premium.<\/p>\n\n\n\n

b. Then on 22 September 2025, the exemption for individual health and individual life insurance policies was implemented, reducing the GST rate for eligible individual policies to zero.<\/p>\n\n\n\n

c. The relief applies to personal health insurance policies such as family Floater health insurance policies and health insurance for senior citizens. The relief is also available on personal life insurance such as term insurance plan, endowment plans, and ULIPs.<\/p>\n\n\n\n

d. Briefly put, a person who purchases an individual term plan or renews an individual health plan will not be required to pay the 18 per cent GST on the sum insured.<\/p>\n\n\n\n

e. This especially benefits families who have multiple insurance obligations. For instance, the household might have individual health insurance plans for the parents, a family floater insurance policy for the couple and kids, and term plans for the working-age individuals. Previously, GST would raise the premium for each qualified policy. Now, that additional tax will not be levied on those individual premiums anymore.<\/p>\n\n\n\n

f. One key difference, though, in respect of this exemption, is that it would be for each individual policy and not a blanket exemption for every insurance policy in the market. 18% GST would still be applicable to group insurance and group health or life cover sponsored by an employer.<\/p>\n\n\n\n

2. Does Zero GST Actually Equate to an 18% Discount?<\/strong><\/p>\n\n\n\n

The calculation here can lead to confusion.<\/p>\n\n\n\n

Often, people think they would pay 18% less for their total insurance since GST has been abolished, but GST was assumed to be removed from the basic premium and not the total bill including GST.<\/p>\n\n\n\n

Let\u2019s take a simple illustration:<\/em><\/p>\n\n\n\n

Let us assume your personal health insurance has a base premium of \u20b910,000 annually.<\/p>\n\n\n\n

Base premium:<\/strong> \u20b910,000<\/p>\n\n\n\n

Earlier GST of 18%:<\/strong> \u20b91,800<\/p>\n\n\n\n

Earlier payment to be made:<\/strong> \u20b911,800<\/p>\n\n\n\n

Current GST:<\/strong> \u20b90<\/p>\n\n\n\n

Total amount to pay now:<\/strong> \u20b910,000<\/p>\n\n\n\n

The gain in this deal is \u20b91,800 yearly.<\/p>\n\n\n\n

The tax that was levied was 18% of the premium amount, but when compared to the above-stated amount, it was around 15.25%.<\/p>\n\n\n\n

Why should I care? Well, now that you know the difference, it will enable you to work out your actual savings and not just assume an 18% discount on the final amount shown on the old invoice.<\/p>\n\n\n\n

For a lone policy, it might seem small, but when it is held across a number of policies within the same family, it adds up to a significant amount.<\/p>\n\n\n\n

Pro-Tip:<\/strong> If you’re comparing an old premium receipt to a new one, compare the base premium and the GST separately. Just looking at the total amount payable may be deceptive if the insurer has also increased the premium because of age, changing policy terms or new rating.<\/p>\n\n\n\n

3. How Much Do Policyholders of Health Insurance Save?<\/strong><\/p>\n\n\n\n

Example 1: Individual health insurance<\/em><\/strong><\/p>\n\n\n\n

Suppose your individual health insurance premium is \u20b918,000 for the year before GST.<\/p>\n\n\n\n

Previously, it would have been:<\/p>\n\n\n\n

Base premium per year:<\/strong> \u20b918,000<\/p>\n\n\n\n

GST (18%):<\/strong> \u20b93,240<\/p>\n\n\n\n

Total Yearly Payment:<\/strong> \u20b921,240<\/p>\n\n\n\n

In the case of the new exemption, the amount will be \u20b918,000 if the base price of this policy is also the same.<\/p>\n\n\n\n

Annual saving:<\/strong> \u20b93,240.<\/p>\n\n\n\n

That is \u20b916,200 gone in GST (all else remaining the same, and assuming the same base premium).<\/p>\n\n\n\n

Example 2: Family floater health insurance<\/em><\/strong><\/p>\n\n\n\n

For a Family Floater plan that covers two adults and two children at a base annual premium of \u20b930,000, here’s how the premium paid is distributed:<\/p>\n\n\n\n

Earlier:<\/em><\/strong><\/p>\n\n\n\n

Base premium:<\/strong> \u20b930,000<\/p>\n\n\n\n

GST at 18%:<\/strong> \u20b95,400<\/p>\n\n\n\n

Total payable:<\/strong> \u20b935,400<\/p>\n\n\n\n

After the exemption:<\/em><\/strong><\/p>\n\n\n\n

Base premium:<\/strong> \u20b930,000<\/p>\n\n\n\n

GST:<\/strong> \u20b90<\/p>\n\n\n\n

Total payable:<\/strong> \u20b930,000<\/p>\n\n\n\n

Annual saving:<\/strong> \u20b95,400.<\/p>\n\n\n\n

For a family that has annual renewal, this should be considered important time and space in-hand. These savings can help fund a medical emergency fund, preventive health costs or buy extra insurance protection.<\/p>\n\n\n\n

Example 3: Senior citizen health insurance<\/em><\/strong><\/p>\n\n\n\n

Let’s assume an individual insurance policy of a senior citizen cost base for a year is of \u20b9 45,000.<\/p>\n\n\n\n

Previously, an 18% GST would have resulted in an additional bill of \u20b98,100. The new extra bill is \u20b953,100.<\/p>\n\n\n\n

With the exemption, the payable premium = \u20b945,000, assuming no change in premium.<\/p>\n\n\n\n

Annual saving:<\/strong> \u20b98,100.<\/p>\n\n\n\n

This will be particularly good news for older policyholders as they are likely to have already been paying higher premiums for their age and healthcare needs.<\/p>\n\n\n\n

The actual savings will, of course, depend upon the premium from the insurer. Here are a few illustrative calculations. Please note these are not insurance quotes.<\/p>\n\n\n\n

4. What Do Buyers of Term Insurance Save?<\/strong><\/p>\n\n\n\n

Term insurance is generally taken out to secure the economic future of dependants. The concept is quite simple. The policy pays the specified death benefit to the beneficiary in case of the insured’s demise during the insuring period, subject to the terms of the policy.<\/p>\n\n\n\n

Since term policies are generally in force for long periods, an apparently insignificant tax savings can accumulate over time.<\/p>\n\n\n\n

Let’s visualize somebody who has taken a standard individual term plan with an annual premium of \u20b915,000.<\/p>\n\n\n\n

Previously:<\/em><\/p>\n\n\n\n

Basic annual premium:<\/strong> \u20b915,000<\/p>\n\n\n\n

GST of 18%:<\/strong> \u20b92,700<\/p>\n\n\n\n

Total payable: \u20b9<\/strong>17,700<\/p>\n\n\n\n

Now, after the exemption:<\/em><\/p>\n\n\n\n

Basic annual premium:<\/strong> \u20b915,000<\/p>\n\n\n\n

GST: \u20b9<\/strong>0<\/p>\n\n\n\n

Total payable:<\/strong> \u20b915,000<\/p>\n\n\n\n

Annual savings:<\/strong> \u20b92,700.<\/p>\n\n\n\n

Let\u2019s assume that the term of the policy is a 25-year premium paying term and the basic premium is still \u20b915,000 every year.<\/p>\n\n\n\n

Thus, the overall accumulated GST savings will be:<\/p>\n\n\n\n

\u20b92,700 \u00d7 25 = \u20b967,500.<\/p>\n\n\n\n

That is a considerable amount in terms of the life of the policy.<\/p>\n\n\n\n

When stating so, we assume that the annual basic premium remains the same. This is only an example and does not mean that this is true for all term plans. There are different types of premium systems; limited-pay programs or single premium plans should be treated independently.<\/p>\n\n\n\n

For a standard-level premium term plan, on the other hand, this is illustrative of how this exemption really pays off in the long run.<\/p>\n\n\n\n

5. How Does a Family With Both Policies Save Money?<\/strong><\/p>\n\n\n\n

This is what makes it more clear to see the advantage.<\/p>\n\n\n\n

Almost all households tend to have a health and a term insurance policy. Term insurance benefits the dependents of a breadwinner, whereas health insurance acts as a safeguard to one’s saving against hospitalisation.<\/p>\n\n\n\n

Suppose we have a family with these individual plans:<\/em><\/p>\n\n\n\n

Health insurance for a family floater:<\/em><\/strong><\/p>\n\n\n\n

Annual base premium:<\/strong> \u20b924,000<\/p>\n\n\n\n

Previous GST:<\/strong> \u20b94,320<\/p>\n\n\n\n

Existing GST:<\/strong> \u20b90<\/p>\n\n\n\n

Annual saving:<\/strong> \u20b94,320<\/p>\n\n\n\n

Individual term insurance:<\/em><\/strong><\/p>\n\n\n\n

Annual base premium:<\/strong> \u20b916,000<\/p>\n\n\n\n

Previous GST:<\/strong> \u20b92,880<\/p>\n\n\n\n

Current GST: \u20b9<\/strong>0<\/p>\n\n\n\n

Annual saving:<\/strong> \u20b92,880<\/p>\n\n\n\n

The total of the family’s individual health and the family term insurance premiums put together has a base sum of \u20b940,000.<\/p>\n\n\n\n

Previously, they would have had to pay a total of \u20b947,200, with a GST payment of \u20b97,200.<\/p>\n\n\n\n

Now the total = \u20b9 40,000 (if the base premiums still have not changed).<\/p>\n\n\n\n

Combined annual saving: \u20b97,200.<\/p>\n\n\n\n

In ten years, the family can save a total of \u20b972,000 of GST, assuming that the sum assured remained unchanged.<\/p>\n\n\n\n

Assuming the same conditions in the world for twenty years, the tentative saving would be up to Rs.1,44,000.<\/p>\n\n\n\n

This is not a guaranteed lifetime saving. Health insurance premiums may change, depending on your age and your insurer’s pricing, as well as product and cover updates. Nevertheless, the calculation demonstrates how much GST would have been added to the premiums over the years.<\/p>\n\n\n\n

Pro-Tip:<\/strong> Just total the base premiums of each of your eligible individual health and life insurance policies. Then multiply that figure by 18% to arrive at the amount of GST you would have paid under the previous arrangement. That’s the number you need to know!<\/p>\n\n\n\n

6. Are Employer-Sponsored and Group Insurance Policies Still Subject to GST?<\/strong><\/p>\n\n\n\n

Yes, and this is arguably the most important point.<\/p>\n\n\n\n

GST exemption is only for policies of individual life and individual health insurance. For group insurance policies, GST is still charged at 18%.<\/p>\n\n\n\n

Including employer-sponsored group health insurance and group life insurance (including group term insurance).<\/p>\n\n\n\n

Let’s assume, then, that your employer takes out a group health insurance scheme for employees, with an annual cost of \u20b910,000 per head. This scheme is also still billed under the group insurance rules, at 18% GST. The tax is included in the insurer’s group-policy billing, although who ultimately bears its cost is a matter of arrangement.<\/p>\n\n\n\n

The same goes for group term cover: even when the benefit is comparable to an individual term policy, it is the way it is arranged that makes the difference.<\/p>\n\n\n\n

This is confusing as you can have two people with similar insurances yet be in different GST situations.<\/p>\n\n\n\n

For example:<\/em><\/strong><\/p>\n\n\n\n

a. The exemption will apply if you are purchasing an individual health insurance policy for yourself.<\/p>\n\n\n\n

b. An employee insured under an employer’s group health insurance policy is not protected by this individual-policy exemption.<\/p>\n\n\n\n

c. Yes, an individual term plan buyer is exempted.<\/p>\n\n\n\n

d. An individual with group term insurance also remains under this treatment of 18% GST.<\/p>\n\n\n\n

That is also the reason I would never believe that just because every insurance premium appears in the name or salary package of a person, it would always be zero GST.<\/p>\n\n\n\n

Pro-Tip:<\/strong> Confirm if the cover is a group or individual policy- the designation on the policy certificate can be a clue, but the named insured alone is not the deciding factor for GST.<\/p>\n\n\n\n

7. What Takes Place When Your Policy Is Renewed?<\/strong><\/p>\n\n\n\n

a. The waiver does not only apply to people purchasing a totally new insurance policy after September 2025 for customers who already have a policy.<\/p>\n\n\n\n

b. Similar rules apply to other individual health and life policies that are on renewal.<\/p>\n\n\n\n

c. Say, if your renewal date for a health insurance policy fell on 21st September 2025 but the premium payment was received on 22nd September 2025 or any other date, then the special clarification stipulates that, in such circumstances, the new exempt rate will be applied.<\/p>\n\n\n\n

d. GST treatment of premiums paid by instalment: For instalments, the GST treatment is applied to each instalment on the basis of the date it was paid. The instalment paid before 22 September 2025 would attract the earlier rate, while an eligible instalment paid on or after 22 September 2025 would be GST-free.<\/p>\n\n\n\n

e. It is also important to note the advance payment timing rule. When the invoice, payment and supply events occur on different dates, how they are treated will depend on the time-of-supply rules. In some circumstances, at least two of the three of these events should occur on or after 22 September 2025.<\/p>\n\n\n\n

f. Up till the time the switch takes effect for the normal policyholder renewal, in most cases, the simple practical issue is that a policy costing an eligible individual policy should not be subject to 18% GST on renewal.<\/p>\n\n\n\n

g. However, don’t overlook the balance of the renewal invoice. However, the amount payable can vary for a reason other than GST.<\/p>\n\n\n\n

h. For instance, the health premium might have gone up because you have changed into a new age band, the insurer has increased its cost for the product, or you have increased your sum insured.<\/p>\n\n\n\n

i. For a term policy, the payment option might also vary by plan and premium-paying term.<\/p>\n\n\n\n

FAQs:<\/strong><\/p>\n\n\n\n

1. Are individual health and term insurance premiums in India fully exempt from GST?<\/strong><\/p>\n\n\n\n

Yes. Individual health insurance policies eligible and commencing from family floater plans together with a personal life insurance policy, inclusive of a term plan, shall stand exempt from the earlier 18% GST, from 22 September 2025. Such exemption does not include the group and employer-sponsored group insurance plans that still bear the 18% GST charge.<\/p>\n\n\n\n

2. How much would I actually save as a premium due to the removal of 18% GST on insurance premiums?<\/strong><\/p>\n\n\n\n

Your saving will therefore depend on 18% of the base premium of the eligible policy. As an example, if your yearly health insurance premium prior to GST is \u20b920,000, the GST would be \u20b93,600. You would save that amount now, assuming there is no change in the base premium. Actual saving will vary from policy to policy and with any other changes done at renewal.<\/p>\n","protected":false},"excerpt":{"rendered":"

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