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Recently, on 3rd September 2025, the GST Council of India introduced reforms in tax rates for some goods and services. Insurance products, especially health and life, are one of the most affected items under this reform.
As these changes will be effective from 22nd September, it is good to be aware of the tax rates to avoid any extra payment and fraud while buying the policy. At first, GST followed a four-tier tax structure, but now it has been simplified into a two-tier system with rates of 5% and 18%.
There has been a huge change in life insurance that we will discuss in this blog.
Life Insurance GST Reform
The new GST rate implementation is very much favourable for the life insurance policyholder and insurer as well. The Goods and Services Tax Council of India proposed to make life insurance exempt from GST. This reform will be applicable all over India, from 22 September 2025.
This tax rate for life insurance has shifted from 18% to NIL under the new GST rule introduced recently. The GST rate was imposed on the premium amount, which means that if you buy or renew your policy after 22nd September, then your premium amount will be reduced by 18%.
This benefit is available for any of the life insurance types, including term life, endowment policies, reinsurance, and ULIPs.
| Old Tax Rate on Life Insurance | New Tax Rate on Life Insurance |
|---|---|
| 18% | 0% |
Positive Impact of Zero GST for Life Insurance Policies
There are many benefits of zero Goods and Services Tax on life insurance. Some of the main importance are:
- Lower Premium Cost: With a zero GST rate, life insurance premiums become more affordable.
- Encourages More People: Cheaper premiums encourage more people to buy life insurance.
- Financial Relief: Middle-class families will face less burden while paying for policies.
- Better Protection: More families can secure their future with life insurance coverage.
- Promotes Savings: Lower costs encourage long-term financial planning and disciplined savings.
- Industry Growth: Increased demand for policies supports the growth of the insurance sector.
What to Do Next as a Policyholder?
As a policyholder, you will see financial benefits after this reformed rate is applicable. But there are some points to consider as a policyholder.
1Check Renewals
As an existing policyholder, review the renewal dates of your existing life and insurance policies. Renewal of the policy on or after 22nd September helps you benefit from zero GST reform. But if your renewal is due before, do not delay it, as you will not be liable for any tax deduction. Always remember that continuous coverage is very important.
2Plan New Purchases
If you are planning to buy a new life insurance policy, it is advisable to wait till 22nd September. Due to the zero GST reform, the life insurance policy will become much cheaper. Any life insurance policy purchased after September 22 will not charge GST from the policyholder, as it has already been exempted.
3Better Financial Planning
As the cost of insurance has been reduced, you should start focusing on financial planning for you and your family. Lower costs mean you can add insurance easily to your monthly budget without an extra burden. You can get life insurance that not only protects your family but also provides them with financial assistance in your absence.
Conclusion
GST on life insurance products, including term life, endowment policies, reinsurance, and ULIPs, is now exempted from GST completely.
Understanding the life insurance GST rate in India is important for every policyholder. This exemption directly affects the premium you pay, and makes life insurance more affordable.
Knowing the rates, renewal dates, and benefits will help you make smart decisions. In simple words, GST reforms are making life insurance not just a safety element, but also a cost-effective way to secure your family’s future.
FAQs
The current life insurance GST rate in India is 18%. This tax amount is added to your premium payment. However, from 22nd September 2025, the GST on life insurance will be reduced to nil, which makes the premium cheaper.
GST on life insurance increases the total premium you pay to the insurer. With the new reform, the GST rate will be set to zero from 22nd September 2025. And, policies will become more affordable for everyone.
Earlier, the term insurance GST rate was 18%. But after the introduction of the new GST rule effective from 22nd September 2025, the term insurance GST will also be nil. The reduction of the GST rate will reduce the premium costs.
Yes, Life Insurance GST applies to term plans, endowment plans, ULIPs, and other life insurance products. The GST rate is not charged on the premium amount of these categories of LIC policies.
Yes, the removal of GST on life insurance will lower premiums, encourage more people to buy insurance, and make financial planning easier.
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