GST on Insurance in India

Since July 2017, the Goods and Services Tax (GST) has reshaped India's tax structure. Insurance stands among the sectors most affected by this change. If you own insurance policies or plan to buy some, you'll need proper clarity on how GST affects your premiums.

Good news for everyone with individual health or Life Insurance: From 22 September 2025, the GST Council will reduce the GST on such policies to zero. That is to say that if you're paying for a policy for an individual, you won't have to pay GST at all—no matter what type of policy you have.

In this article, you will learn about the role of GST in the insurance industry. This will help you make well-planned decisions.

How is the goods and services tax applied to insurance policies?

Insurance companies charge GST whenever they provide services to policyholders. GST on insurance has replaced the old service tax system for insurance premiums.
Earlier, GST on insurance used to fluctuate, to the tune of 1.8% all the way up to 18%, based on the policy. But from September 22, 2025, there will be 0% GST on every individual life and health insurance policy. That's right; no additional tax is levied on your premiums.
What does this translate to in real terms? If you had paid ₹10,000 for a life insurance premium earlier, you'd be paying ₹11,800 due to the 18% GST. Now, you will pay flat ₹10,000, saving ₹1,800 per year. The same applies to health insurance and all other individual policies—no more GST.
But keep in mind: this change only applies to individual policies. If you’re covered under a group insurance policy through your employer, the 18% GST still applies.

GST rates on insurance policies

Here’s a quick summary of the new GST rates on insurance (effective September 22, 2025):

Individual Policies:

• Term Insurance: 0% (previously 18%)
• Unit Linked Insurance Plans (ULIPs): 0% (previously 18% on charges)
• Health Insurance: 0% (previously 18%)
• Endowment Plans: 0% (earlier 4.5% in the first year, 2.25% subsequently)
• Single Premium Annuity Plans: 0% (earlier 1.8%)

Group Policies:

• Group Life Insurance: 18%
• Group Health Insurance: 18%

Your insurance agent or financial planner should clearly explain what you'll pay, including all applicable taxes. If you're planning to purchase a new individual policy after 22 September 2025, keep this in mind: You'll never pay GST on it, regardless of the type.

How does GST differ from the type of life insurance?

From September 2025, all the insurance policies will be tax-free, i.e., no GST will be charged on them.

Term plans, ULIPs, endowment plans, and health insurance—all are GST-exempt. For instance, if a Term Insurance premium of ₹5,000 is charged, you pay precisely ₹5,000. No extra fees, no extra tax.

ULIPs also stand to gain enormously as all GST is gone now on all charges, including fund management fees, mortality fees, and admin charges.

Endowment schemes go tax-free right from the beginning, so if you pay ₹10,000 yearly, that's all you pay. No more GST adjustments for various years.

Policies exempt from GST on insurance

Government schemes of insurance were GST-free to begin with, and that isn't changing in GST 2.0. These schemes include:

• Central government life cover for armed forces personnel (Army, Navy, Air Force).
• Government schemes like PMJJBY and PMSBY.
• Micro-insurance products with a coverage of up to ₹50,000.
• Varishtha Pension Bima Yojana.
• Pradhan Mantri Vaya Vandana Yojana.

These exempt policies won't add any GST to your premium costs.

Does GST paid for insurance provide tax savings?

If you purchased your policy before 22 September 2025, you are relieved of the GST you paid as a premium on your life insurance policy. GST is eligible to be added to your Section 80C deduction, up to ₹1.5 lakh per year.

For any policy bought on or after 22 September 2025, things are easier. GST on individual health and life insurance is zero, so you don't pay it any longer. You save money right from the start. The basic premium is still deductible under tax—Section 80C for life insurance, Section 80D for health insurance—just stick to the normal limits.

For medical insurance, Section 80D lets you claim the premium itself (now with no GST, as it's 0%). You can claim ₹25,000 in a year, or ₹50,000 if you're a senior citizen.

Keep in mind that the Income Tax Act specifies the ceilings and rules for all these deductions. It's always best to consult a tax consultant—she or he can advise on how these rules apply to your case.

Some leading banks offer several ways to pay your insurance GST. This section of GST will not be important for individuals post-September 2025, but group insurance policies will continue to charge 18% GST. Their payment options include:

• Internet banking: Sign in to your bank account, find the GST section, and enter your GSTIN and other details to make a secure payment.
• NEFT/RTGS: This is another convenient option for quick payments.
• Over-the-Counter: Visit the bank branch, where the staff there will process your GST payment.

You can also register your GSTIN with Axis Bank by filling out the forms at a branch or update your details through internet banking. This ensures the proper recording of all your GST transactions. Explore our GST Services for more information about insurance GST payments.

Also Read: Section 80C: Complete Guide to Tax-Saving Deductions in India

Conclusion

It's critical to include GST rates in your budgeting. Now, individual life and health insurance policies are GST-free, resulting in more money in your pocket. Group insurance remains at the standard 18% GST. Government insurance schemes and individual policies are both GST-exempt now. Remember that the insurance premium GST can be offset against taxes through Sections 80C and 80D, within set limits. You should consult a tax expert to discuss your specific situation.

Understanding how GST affects your insurance enables you to make more informed choices about protecting yourself and your family. Stay updated on GST rates and exemptions to maximise your insurance benefits while following tax regulations.

Frequently Asked Questions

Is it possible to get tax benefits for GST on insurance?

From 22 September 2025, you won't be paying GST on individual health and life insurance. You continue to enjoy your tax deductions on the premium amount itself under Sections 80C and 80D.

Is GST in addition to the existing taxes I am paying on my insurance policies?

GST has replaced the earlier indirect service taxes, such as Service Tax, Swachh Bharat Cess, and Krishi Kalyan Cess, on insurance premiums. Rather than paying multiple indirect taxes. If your cover is provided by your employer as a group policy, the 18% GST continues. Plan wisely—and reap the benefits.

Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article

Tax and GST regulations are subject to change. The information in this article is based on applicable laws, rules, notifications, and interpretations in force as on the date of publication and may change due to amendments, judicial decisions, or regulatory updates.