The GST Council has made a historic choice to make financial security easier to get. They have said that GST would no longer apply to individual life and health insurance premiums. The new law, which will go into effect on September 22, 2025, says that policies will not have to pay the old 18% tax.
The 56th GST Council meeting, which was led by Finance Minister Nirmala Sitharaman, announced the change. The decision is part of a bigger change to the GST that makes tax brackets easier to understand. The Press Information Bureau (PIB) has said that the exemption applies to all types of individual policies, including as term, ULIP, endowment, family floater, and senior citizen plans. The exemption also covers reinsurance for these policies.
What This Means for You: You will save money right away. The 18% GST will be gone if you buy a new individual life or health coverage on or after September 22. For instance, a policy with a basic premium of ₹20,000 would have cost you ₹23,600 before (including ₹3,600 in GST). You will just have to pay ₹20,000 now, which is a straight savings of ₹3,600. This is a big help for people buying for the first time and makes it easier for current customers to pay for a bigger sum covered or add-on riders.
Who is eligible: The exemption only applies to individual life and health insurance plans. Right now, it doesn’t apply to group policies, so be sure you know what kind of policy you have.
Renewals and Existing Policies: The 0% GST applies to any premiums charged on or after September 22. You should see the advantage on your next premium bill if your policy renewal is after this date. If you have a mid-term, multi-year policy, keep an eye out for messages from your insurance company. The CBIC will send out official notifications that will explain the specifics.
What it means for the market
This is good news for customers, but it could mean changes in the insurance industry. Insurers can lose input tax credit (ITC) on their operating costs if they no longer have to pay GST on premiums. Over time, analysts think this could lead to some changes in pricing or product design. But for customers, the fact that they don’t have to pay GST on the bill right away is an obvious plus. How these costs are handled by insurers will affect the long-term price.
A List of Things to Do Before Buying Insurance
This new tax break is a great moment to look at your insurance needs. Here are some important things to think about when you buy a policy after September 22:
Adequate Sum Insured: Make sure your coverage is enough to cover the escalating costs of medical care.
No Sub-Limits: Choose plans that don’t have stringent limits on room rent or certain treatments to prevent having to pay out claims you didn’t expect.
Waiting Periods: Know how long you have to wait for pre-existing conditions and certain disorders.
Network & Claims: It’s important to have a large network of hospitals that don’t charge you and a claims process that goes smoothly.
Riders: You may fine-tune your protection with add-ons like critical illness riders.
Reputation of the Insurer: Look at the insurer’s claim settlement ratio and service history.
Keep in mind that the basics of financial planning haven’t changed; the 0% GST just makes excellent insurance selections cheaper. This new law, along with the tax breaks you already get, is a strong reason to make sure you and your family are safe.