On September 4, 2025, Finance Minister Nirmala Sitharaman, after chairing the 56th GST Council Meeting, delivered a festival-season surprise for millions of Indians.
She announced a landmark reform that all individual life and health insurance policies will now attract 0% GST effective from September 22, 2025, aligning with Navratri festivities.
Which Signifies:
Life Insurance: Term Life, ULIP's, Endowment policies
Health Insurance: Individual policies, Family Floater plans, Senior Citizen policies
and Renewal on Individual Health and Life Insurance
All of the above will now carry 0% GST, compared to 18% earlier.
The decision is being seen as a landmark pro-consumer reform, one that makes insurance affordable, boosts financial security, and aligns with the government’s “Insurance for All by 2047” vision.
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Insurance premiums had become costlier due to the 18% GST slab.
For example:
Earlier, the ₹20,000 health insurance premium cost ₹23,600 (with GST).
After September 22, the same policy will cost only ₹20,000.
That’s ₹3,600 saved every year—a significant relief for families, especially senior citizens who face higher premiums.
India still has one of the lowest insurance penetration rates globally, which is around 4% (vs. 10–12% in developed economies). High costs were a barrier but since there is a change, insurance becomes more attractive and affordable, driving higher adoption.
Family floater policies, which cover multiple members, often have premiums above ₹30,000–50,000. Removing GST reduces the burden substantially. Senior citizens, who pay the highest premiums due to age-related risks, are among the biggest beneficiaries.
With affordability improved, insurers expect:
This insurance exemption is part of a sweeping GST restructuring, where the government reduced rates on essentials and rationalised slabs.
| Category | Old GST Rate | New GST Rate | Impact |
|---|---|---|---|
| Life & Health Insurance | 18% | 0% | Lower premiums |
| Daily Essentials (soap, toothpaste, detergents) | 12–18% | 5% | Household savings |
| Indian Staples (roti, paneer, milk) | 5% | 0% | No tax on basics |
| Life-saving drugs & devices | 12–18% | 0–5% | Affordable healthcare |
| Small appliances & vehicles | 28% | 18% | Cheaper electronics, bikes and cars below 350 cc |
| Luxury & sin goods | 28% | 40% | Costlier consumption |
Source: PIB
With this, India moves from 4 GST slabs to just 2 slabs (5% & 18%) + 40% for luxury/sin goods, simplifying compliance and boosting transparency.
The GST waiver on individual life and health insurance is not just a tax reform—it’s a transformative step towards financial inclusion. By removing the 18% GST burden, the government has made protection more affordable, accessible, and attractive for millions of households.
For families, this means direct savings and wider coverage. For insurers, it promises higher adoption and deeper market penetration. And for the nation, it marks progress toward the vision of “Insurance for All by 2047”.
In essence, this reform is more than a fiscal adjustment, it is a social safety net expansion, ensuring that every Indian can secure their future without being priced out by taxes. With this move, insurance becomes what it was always meant to be: a shield of security, not a financial burden.
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